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The Fed’s efforts to raise interest rates across the spectrum have borne fruit only in limited fashion. In the Treasury market, yields of longer-dated securities have not risen (prices fall when yields rise) as sharply as they have with Treasuries of shorter maturities. The two-year yield has surged to 2.41% on Tuesday, the highest since July 2008. But the 10-year yield, at 2.82%, while double from two years ago, is only back where it had been in 2014. So the difference (the “spread”) between the two has narrowed to just 0.41 percentage points, the narrowest since before the Financial Crisis:

This disconnect is typical during the earlier stages of the rate-hike cycle because the Fed, through its market operations, targets the federal funds rate. Short-term Treasury yields follow with some will of their own. But the long end doesn’t rise at the same pace, or doesn’t rise at all because there is a lot of demand for these securities at those yields. Investors are “fighting the Fed”— doing the opposite of what the Fed wants them to do – and the difference between the shorter and longer maturities dwindles, and it dwindles, and it causes a lot of gray hairs, and it dwindles further, until it stops making sense to investors and they open their eyes and get out of the chase, and suddenly long-term yield surge higher, as bond prices drop sharply.

That’s why short sellers have taken record positions against the 10-year Treasury recently: they’re waiting for yields to spike to the next level. But this disconnect – this symptom of investors fighting the Fed – in the Treasury market is mild compared to the disconnect in the junk bond market. There, investors have completely blown off the Fed. At least in the Treasury market, 10-year yields have risen since the Fed started getting serious about rate increases in December 2016. In the junk bond market, yields have since fallen. In other words, despite the Fed’s tightening, the junk bond bubble has gotten bigger. And investors are not yet showing any signs of second thoughts.

The postwar global trading system risks being torn apart, the International Monetary Fund has warned, amid concern over the tariff showdown between the US and China. In a sign of its growing concern that protectionism is being stimulated by voter scepticism, the IMF used its half-yearly health check for the world economy to tell policymakers they needed to address the public’s concerns before a better-than-expected period of growth came to an end. Maurice Obstfeld, the IMF’s economic counsellor, said: “The first shots in a potential trade war have now been fired.” He said Donald Trump’s tax cuts would suck imports into the US and increase the size of the trade deficit 2019 by $150bn – a trend that could exacerbate trade tensions.

“The multilateral rules-based trade system that evolved after world war two and that nurtured unprecedented growth in the world economy needs strengthening. Instead, it is in danger of being torn apart.” Obstfeld said there was more of a “phoney war” between the US and China than a return to the widespread use of tariffs in the Great Depression, but that there were signs that even the threat of protectionism was already harming growth. “That major economies are flirting with trade war at a time of widespread economic expansion may seem paradoxical – especially when the expansion is so reliant on investment and trade,” Obstfeld added.

The euro area’s economic expansion is standing on increasingly shaky ground after reports showed German investor confidence tumbling to its lowest level since late 2012 and the risk of a recession in the nation jumping. The sentiment gauge from ZEW showed more investors now see a worsening in Europe’s largest economy than forecast an improvement, a mood swing that ZEW President Achim Wambach blamed on the U.S. trade dispute combined with weak domestic retail and production numbers. The drop in confidence came as the Dusseldorf-based Macroeconomic Policy Institute (IMK) said the probability of a recession in Germany over the next three months has jumped to 32%.

While that outcome remains unlikely, the gauge is up sharply from 6.8% in March. It follows U.S. attempts to rewrite international trade rules by imposing import tariffs, triggering a tit-for-tat response by China. Even though the European Union has temporarily been exempted from the metal levies, risks of far-reaching retaliatory measures could still hurt Germany’s export-driven economy – feeding into signs that growth in the euro area is coming off its peak. At the IMK, the recession gauge, which uses data that have signaled downturns in the past is now orange – the middle of its traffic-light warning system – for the first time since March 2016. That was just as the German economy was entering a mild slowdown.

“Volatility in financial markets, which has been evident for several months, is now accompanied by a noticeable deterioration in sentiment and subdued production,” according to IMK. “This has recently become a typical constellation for the end phase of a cycle.”

The price of several cryptocurrencies took a sudden hit Tuesday over the course of 20 minutes, which some suspect may be the result of a single Bitcoin whale who unloaded over $50 million worth of the digital currency in one Bitfinex trade. The drop comes one day after the third largest bitcoin wallet also unloaded around $50 million of the digital currency. As Marketwatch first noted , “the balance of wallet 3D2oetdNuZUqQHPJmcMDDHYoqkyNVsFk9r — an anonymous digital account which is valued at $1.49 billion — fell by 6,500 bitcoin Tuesday, with the average sale price sale being $8,146.70, a total value of just over $50 million, according to bitinfocharts.”

The sale comes a day after the third-largest wallet, which famously purchased over $400 million in bitcoin in February, let go of 6,600 bitcoin at an average price of $8,026. Combined, the two whales unloaded over $100 million of bitcoin within 24 hours. As there was no immediate news or catalyst, some attributed the sale to Tuesday’s report that New York Attorney General Eric Schneiderman had launched an investigation into 13 cryptocurrency exchanges including Coinbase, Gemini and Bit Trust. The probe seeks information on fees, volume data and procedures governing margin trading among other things. However, the news hit some 4 hours prior to the sale.

One week ago, when the Trump administration unveiled the most draconian Russian sanctions yet which among others targeted Putin-ally Oleg Deripaska and the Russian oligarch’s aluminum giant, Rusal, we said that aluminum prices are going higher, much higher, for one reason: excluding China’s zombie producers, Rusal is the world’s largest producer of aluminum. Well, prices have since surged, largely as expected, and one week later we also learned just how “radioactive’ Rusal’s products have become as a result of the US sanctions: overnight Reuters reported that major Japanese trading houses asked the Russian aluminum producer to stop shipping refined aluminum and other products in light of U.S. sanctions on the world’s No.2 producer and are scrambling to secure metal elsewhere, according to industry sources.

“We have requested Rusal stop shipments of aluminum for our term contracts as we can’t make payment in U.S. dollars and we don’t want to take the risk of becoming a secondary sanction target by the United States,” said a source at a trading house [..] It is unclear how and where Japan can find alternative sources of aluminum: Japan buys about 300,000 tonnes of refined aluminum from Russia, about 16% of the nation’s total import, according to the Japan Aluminium Association. “Everyone has been on a search for substitutes and that pushed local spot premiums to around $200-$250 per tonne by last Friday,” he said. That’s sharply higher than Japan term premiums for April-June quarter shipments at $129 per tonne.

The contra-narrative about Assad’s alleged gas attack is gaining traction as the evidence comes in. It increasingly seems probable that some folks suffocated or were overcome with smoke inhalation and hypoxia (oxygen deprivation) when buildings, tunnels and underground bunkers collapsed into clouds of dust during the final battle for Douma last Saturday. Then the desperate remnant of the jihadist Army of Islam (Jaysh al-Islam) holed up there piled the bodies in a basement, spread shaving cream on their lips and proceeded to videotape furiously. Thereafter, they charged into a nearby hospital (which was treating hypoxia victims) with their video cameras in hand, yelling “chemical attack” while water-hosing one and all, thereby setting off the pandemonium seen on social media around the world.

We haven’t gotten to Douma yet to check out this contra-narrative, but an intrepid young reporter named Pearson Sharp did. Along with his camera crew, he visited the site of the attack, the hospital and the nearby rebel weapons dump – and interviewed dozens of people in the immediate vicinity. According to Sharp, none of them witnessed the alleged gas attack or believed it happened, and several personnel at the Douma hospital corroborated the phony water-dousing melee. Indeed, the head surgeon insisted to him that no one had died at the hospital from chemical agents. And he also saw and videoed room after room stacked with rockets, mortars and other military gear and filmed the debris and dilapidated remnants of buildings in the town.

[..] Self-evidently, a visiting Martian might have an altogether different interpretation of which nation had ventured down the “dark path” and which one was a “force for stability and peace”. And that would especially be the case with just a few more reports like the new missive from veteran war correspondent, Robert Fisk of the Independent (UK). Unlike young Mr. Pearson Sharp, Fisk has been a war correspondent in the Middle East for four decades and has won endless awards for reporting from the front lines. But his chops were earned when he became one of the few reporters in history to conduct face-to-face interviews with Osama bin Laden on three separate occasions during the 1990s.

Fisk’s dispatch filed Monday night speaks for itself and merits quoting at length because it not only skewers Washington’s narrative about Assad’s gas attack, but also provides vivid context: Whatever happened last Saturday erupted in the fog of war and could not possibly have been instantly assessed objectively or correctly by officials 6,000 miles away, who admit to having no “assets” on the ground in Damascus.

The fact that Philip May is both a Senior Executive of a hugely powerful investment firm, and privy to reams of insider information from the Prime Minister – knowledge which, when it becomes public, hugely affects the share prices of the companies his firm invests in – makes Mr May’s official employment a staggering conflict of interest for the husband of a sitting Prime Minister. However, aside from the ease at which he is able to glean insider information from his wife about potential decisions which could go on to make huge profits for his firm, there is a far darker conflict of interest that has so far gone undiscussed.

Philip May is a Senior Executive of Capital Group, an Investment Firm who buy shares in all sorts of companies across the globe – including thousands of shares in the world’s biggest Defence Firm, Lockheed Martin. According to Investopedia, Philip May’s Capital Group owned around 7.09% of Lockheed Martin in March 2018 – a stake said to be worth more than £7Bn at this time. Whilst other sources say Capital Group’s shareholding of Lockheed Martin may actually be closer to 10%. On the 14th April 2018, the Prime Minister Theresa May sanctioned British military action on Syria in response to an apparent chemical attack on the city of Douma – air strikes that saw the debut of a new type of Cruise Missile, the JASSM, produced exclusively by the Lockheed Martin Corporation.

The debut of this new – and incredibly expensive – weapon was exactly what US President Donald Trump was referring to when he tweeted that the weapons being fired on Syria would be “nice and new and ‘smart!’” Every single JASSM used in the recent bombing of Syria costs more than $1,000,000, and as a result of their widespread use during the recent bombing of Syria by Western forces, the share price of Lockheed Martin soared.

U.S. President Donald Trump voiced his support on Tuesday for Pastor Andrew Brunson, who is on trial in Turkey on charges he was linked to a group accused of orchestrating a failed 2016 military coup, in a case that has compounded strains in U.S.-Turkish relations. “Pastor Andrew Brunson, a fine gentleman and Christian leader in the United States, is on trial and being persecuted in Turkey for no reason,” Trump tweeted. “They call him a spy, but I am more a spy than he is. Hopefully he will be allowed to come home to his beautiful family where he belongs!” Brunson, a Christian pastor from North Carolina who has lived in Turkey for more than two decades, was indicted on charges of helping the group that Ankara holds responsible for the failed 2016 coup against President Tayyip Erdogan.

He faces up to 35 years in prison. Brunson has been the pastor of Izmir Resurrection Church, serving a small Protestant congregation in Turkey’s third largest city. Brunson’s trial is one of several legal cases roiling U.S.-Turkish relations. The two countries are also at odds over U.S. support for a Kurdish militia in northern Syria that Turkey considers a terrorist organization. Washington has called for Brunson’s release while Erdogan suggested last year his fate could be linked to that of U.S.-based Muslim cleric Fethullah Gulen, whose extradition Ankara has repeatedly sought to face charges over the coup attempt.

New refugee and migrant arrivals in Greece will soon be able to move around the country freely without being restricted to the islands of the eastern Aegean where they arrive from neighboring Turkey, according to a Council of State ruling that emerged on Tuesday and upends a 2016 decision by the Greek asylum service that forced them to remain in so-called hotspots until their asylum application was processed. According to the leaked ruling by the country’s highest administrative court, there are no reasons of public interest or migration policy to justify their geographical restriction to the islands of Lesvos, Chios, Samos, Leros, Kos and Rhodes.

Migration Policy Minister Dimitris Vitsas said he would comment on the ruling once he is informed of it officially. Once the ruling is published, new refugees who apply for asylum will be allowed to reside in any part of the country they choose. The asylum service’s May 2016 decision restricting migrants to the Aegean islands was challenged by the Greek Council for Refugees, an NGO which filed an appeal for its cancellation. “The imposition of restrictions on movement blocked the distribution of those people throughout Greek territory and resulted in their unequal concentration in specific regions and the significant burdening and decline of those regions,” the court said in its reasoning.

However, taking into account the large number of arrivals, the court said the ruling does not have a retroactive effect, which means it will not relate to the refugees who are already languishing in reception centers. The so-called hotspots have been operating beyond capacity and the country is now witnessing a fresh spike in arrivals of often flimsy boats carrying desperate passengers from Turkey.

We all know, in theory, that we ought to use less plastic. We’ve all been distressed by the sight of Blue Planet II’s hawksbill turtle entangled in a plastic sack, and felt chastened as we’ve totted up our weekly tally of disposable coffee cups. But still, UK annual plastic waste is now close to 5m tonnes, including enough single-use plastic to fill 1,000 Royal Albert Halls; the government’s planned elimination of “avoidable” plastic waste by 2042 seems a quite dazzling task. It was reported this week that scientists at the University of Portsmouth have accidentally developed a plastic-eating mutant enzyme, and while we wait to see if that will save us all, for one individual the realisation of just how much plastic we use has become an intensely personal matter.

One early evening in mid-2016, Daniel Webb, 36, took a run along the coast near his home in Margate. “It was one of those evenings where the current had brought in lots of debris,” he recalls, because as Webb looked down at the beach from his route along the promenade he noticed a mass of seaweed, tangled with many pieces of plastic. “Old toys, probably 20 years old, bottles that must have been from overseas because they had all kinds of different languages on them, bread tags, which I don’t think had been used for years …” he says. “It was very nostalgic, almost archaeological. And it made me think, as a mid-30s guy, is any of my plastic out there? Had I once dropped a toy in a stream near Wolverhampton, where I’m from, and now it was out in the sea?”

Webb decided that he would start a project to keep all the plastic he used in the course of an entire year. He would not modify his plastic consumption in that time (although he had already given up buying bottled water), and each item would be carefully washed and stored in his spare room.

More than 30 kg of plastic, mainly plastic bags, were found in the stomach of the whale that was washed out on the island of Santorini last week. The conducted autopsy showed that the huge mammal died of a gastric shock. The whale was unable to digest or excrete the rubbish through its digestive system. The problem caused peritonitis inflammation in its intestines that led to the animal’s death, local media report. The dead whale brings back to the spotlight the problem of tonnes of plastic landing into the waters, polluting the environment and leading to death of marine life. The body of the 9-meter long sperm whale – or Physeter macrocephalus as the scientific name is – was washed ashore on Akrotiri area on the island of Santorini in the Aegean island group of Cyclades on April 10th. The body weighting more than 7 tones was in condition of advanced sepsis.

Here’s a delicious little rant from Dr. D., by now a regular contributor at the Automatic Earth.

Dr. D: The schizophrenia surrounding the tariff plan is really startling. But then I could just say, “the level of insanity everywhere is startling.”

Self-avowed schmartz-guys are all “doesn’t the U.S. know their empire is failing and everybody is cutting them off? What are they thinking starting trade wars with allies and raising prices???” Stop. So your argument is the U.S. is losing its influence, other nations are about to cut it off and end the trade deficit, and thereby basically halt imports? While the U.S. has no internal manufacturing? And your argument here is that, not if but when the world cuts us off we a) would like to have some steel and aluminum to build factories, washing machines and tanks or b) do NOT want to have access to the basic raw materials of society? Whiskey Tango Foxtrot.

I’m sorry that this generation burned down the factory, then retreated to the mansion, sold off and burned all the furniture there too, then ran up the credit card with cocaine and heroin parties while yelling “I’m a rock star! I’m a Contender!”, but they did. Now there are only bad decisions, like the ones real adults have.

And there’s nothing but work to put that factory back up, and that’s going to cost something, in this case, money and higher prices, using the thousand-year method of protective tariffs. Why not? Europe has 25% tariffs. China has a virtual lockout. If the U.S. machine then also has higher real wages for U.S. workers they can afford the tariffs. I mean, what’s their counterargument? If it’s better to not have steel and aluminum, perhaps we should shut down the few remaining foundries and have NO materials? I mean, if a little is bad, surely none is way better.

Mish for example thinks this way: if China is willing to give us cheap, under-market steel we should take it. No, not if you want to have a country, you don’t. Isn’t it a matter of national security to be able to make tanks, ships, railroads, and artillery? There’s more to the world than money.

Nor is this arcane. You know that brewing Japanese scandal about approving sub-standard steel worldwide for going on 40 years? Well that sub-standard Chinese and Japanese steel was turned into, say, sub-standard U.S. Abrams Tanks, which may explain why they’ve been breaking and unexpectedly going up like roman candles. So how’s your low-cost steel discount look now that the U.S. doesn’t have an effective military? Come on, guys. Again, the world is not only money, to be measured in money. It’s strategy, it’s community, it’s values. I’m surprised we’re so lost I need to bring this up.

Don’t get me started on how we don’t own (and therefore don’t really secure) our toll roads, ports, bridges, and utilities. They are also widely owned by foreigners now. Really? We (or they) sold every living thing out of the United States, and we’re looking for Russians and Terrorists under the bed? For the love of Pete…

How do you prepare for an Argentina-like collapse and/or up to civil war we are so close to? People who have lived through it say, “you can’t.” If the whole country is mad, which it is, there is nowhere to turn for sense or even allies, to say nothing of dry goods. Co-Americans are now so immoral, so self-serving, so rapacious, so badly thinking, so ill-positioned and ill-prepared that they themselves are the largest single liability, to me, but mostly to themselves. Without basic morality — you know, like do your job, don’t lie about everyone around you, don’t sleep with other people and/or kids at the local high school — there is no “community” as Ilargi discusses. My place may be here, but I can only say: “stay exiled.”

Think the 30% uptick in opioid overdoses is bad? In my small county there are now 3 support groups of 30 each for pedophiles. These are mostly court-directed, meaning these are only the ones we know about. That’s in ADDITION to the self-help groups for alcohol and drug addition. Hey, where did we get those volunteers for Oxfam, UNICEF, and Haiti? And are the police, judges, Congressmen and FBI not also from this same population? Or are they going to arrest themselves and stop it? Maybe I should go arrest the police and see how that goes. It ain’t good.

Only Morality can fix it, where the nation cries out to God and says, “we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe to assure the return of justice and order, even if it means paying for my own crimes.” You see that happening yet? My biggest fear is the present turn will patch it over enough to limp on a little further with no reform, and yet that seems the most likely.

Adams said, “Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.” Benjamin Franklin said, “only a virtuous people are capable of freedom.” This is just Tytler’s cycle of history:

We’ve done it all but bondage. When China cuts off the imports and calls the loans, the cycle of bondage will be complete. Until we find faith, we’ll be peasants in our own land, as planned.

In honor of the Donald’s “Mother of All Bomb” (MOAB) attack on the Hindu Kush mountains Thursday, let me introduce MOAD. I’m referring to the “Mother of All Debt” crises, of course. The opening round is coming when Washington goes into shutdown mode on April 28, which happens to be Day 100 of the Donald’s reign. In theory, this should be just a routine extension of the fiscal year (FY) 2017 continuing resolution (CR) by which Congress is funding the $1.1 trillion compartment of government which is appropriated annually. The remaining $3 trillion per year of entitlements and debt service is on automatic pilot, but the truth is Washington can’t agree on what to do about either component — except to keeping on borrowing to pay the bills. There is a problem with this long-running game of fiscal kick-the-can, however.

Namely, a 100 year-old statute requires Congress to raise the ceiling for treasury borrowing periodically, but the Imperial City has now reached the point in which there is absolutely no way forward to accomplish this. Moreover, that critical fact is ill-understood by Wall Street because it does not remotely recognize that all the debt ceiling increases since the public debt exploded after the 2008-09 crisis were an accident of the Obama presidency. That is, surrounded by Keynesian economic advisers and big spending Democratic politicians, he had no fear of the national debt at all and obviously even believed the more debt the better. And Obama was also able to bamboozle the establishment GOP leadership led by former Speaker Boehner into steering enough GOP votes to the “responsible” course of action.

Needless to say, Obama is gone, Boehner is gone and the 17-month debt ceiling “holiday” that they confected in October 2015 to ride Washington through the election is gone, too. What’s arrived is vicious partisan warfare, a new President who is clueless about the urgency of the debt crisis and a bloc of 50 or so Freedom Caucus Republicans who now rule Washington. And good for them! They genuinely fear and loathe the banana republic financial profligacy that prevails in the Imperial City, and would rip the flesh from Speaker Ryan’s face were he to go the Boehner route and try to assemble a “bipartisan” consensus for a condition-free increase in the debt ceiling.

What that means is a completely new ball game in the Imperial City that will absolutely dominate the agenda as far as the eye can see. That’s because the Freedom Caucus will insist that sweeping entitlement reforms and spending cuts accompany any debt ceiling increase. Even “moderate” Senator Rob Portman (Ohio) has legislation requiring that dollar for dollar deficit cuts accompany any increase in the debt ceiling. But if you think the GOP fractures and fissures generated by Obamacare replace and repeal were difficult, you haven’t seen nothin’ yet. There is absolutely no basis for GOP consensus on meaningful deficit cuts, meaning that MOAD will bring endless starts, stops, showdowns and shutdowns, as the U.S. Treasury recurringly exhausts its cash and short-term extensions of its borrowing authority.

In the meanwhile, everything else — health care reform, tax cuts, infrastructure — will become backed-up in an endless queue of legislative impossibilities. Accordingly, there will be no big tax cut in 2017 or even next year. For all practical purposes Uncle Sam is broke and his elected managers are paralyzed. The Treasury will be out of cash and up against a hard stop debt limit of $19.8 trillion in a matter of months. But long before that there will be a taste of the Shutdown Syndrome on April 28 owing to the accumulating number of “poison pill” “riders” to the CR.

U.S. military commanders are stepping up their fight against Islamist extremism as President Donald Trump’s administration urges them to make more battlefield decisions on their own. As the White House works on a broad strategy, America’s top military commanders are implementing the vision articulated by Defense Secretary Jim Mattis: Decimate Islamic State’s Middle East strongholds and ensure that the militants don’t establish new beachheads in places such as Afghanistan. “There’s nothing formal, but it is beginning to take shape,” a senior U.S. defense official said Friday. “There is a sense among these commanders that they are able to do a bit more—and so they are.” While military commanders complained about White House micromanagement under former President Barack Obama, they are now being told they have more freedom to make decisions without consulting Mr. Trump.

Military commanders around the world are being encouraged to stretch the limits of their existing authorities when needed, but to think seriously about the consequences of their decisions. The more muscular military approach is expanding as the Trump administration debates a comprehensive new strategy to defeat Islamic State. Mr. Mattis has sketched out such a global plan, but the administration has yet to agree on it. While the political debate continues, the military is being encouraged to take more aggressive steps against Islamic extremists around the world. The firmer military stance has fueled growing concerns among State Department officials working on Middle East policy that the Trump administration is giving short shrift to the diplomatic tools the Obama administration favored.

Removing the carrot from the traditional carrot-and-stick approach, some State Department officials warn, could hamper the pursuit of long-term strategies needed to prevent volatile conflicts from reigniting once the shooting stops. The new approach was on display this week in Afghanistan, where Gen. John Nicholson, head of the U.S.-led coalition there, decided to use one of the military’s biggest nonnuclear bombs—a Massive Ordnance Air Blast bomb, or MOAB—to hit a remote Islamic State underground network of tunnels and caves. A senior administration official said Mr. Trump didn’t know about the weapon’s use until it had been dropped. Mr. Mattis “is telling them, ‘It’s not the same as it was, you don’t have to ask us before you drop a MOAB,’” the senior defense official said. “Technically there’s no piece of paper that says you have to ask the president to drop a MOAB. But last year this time, the way [things were] meant, ‘I’m going to drop a MOAB, better let the White House know.’”

We constantly hear the factoids about “American households” that paint a picture of immense wealth – and therefore a lack of risk for consumer lenders during the next downturn. We hear: “This – the thing that happened in 2008 and 2009 – won’t happen again.” For example, total net worth (assets minus debt) of US households and non-profit organization (they’re lumped together) rose to an astronomical $92.8 trillion at the end of 2016, according to the Federal Reserve. This is up by nearly 70% in early 2009 when the Fed started its QE and zero-interest-rate programs. Inflating household wealth was one of the big priorities of the Fed during the Financial Crisis. It would crank up the economy. In an editorial in 2010, Fed Chair Ben Bernanke himself called this the “wealth effect.”

So with this colossal wealth of US households, what could go wrong during the next downturn? Here’s what could go wrong: About half of Americans do not have enough savings to pay for even a minor emergency expense. The Federal Reserve found that 46% of adults could not cover an emergency expense of $400, such as a broken windshield. They would either have to borrow the money or try to sell the couch or something. So nearly half of the adults in the US live from paycheck to paycheck. About 15% of American households have either zero or negative net wealth, according to the New York Fed. Negative net worth means they have more debt than in assets. And nearly 47 million Americans, or nearly 15% of the population, live below the poverty line, according to the Census Bureau.

So who benefited from the “wealth effect”? Those who had the most assets. At the very tippy-top: Warren Buffet. At the other end of the spectrum, in 2016, only 52% of households owned stocks directly or indirectly. The phenomenal stock market boom left 48% – usually those below the poverty line, those who cannot cover emergency expenses, those with zero or negative net worth, etc. etc. – in the dust.

The time has come for financial institutions to prepare for an environment with rising interest rates, a Bundesbank board member told CNBC on Thursday. Many risk managers have focused on credit and liquidity risks, but they need to insert interest rate risks into the equation too, Andreas Dombret, an executive board member of the German Bundesbank, said. “Let’s face it, there are quite a number of risk managers who have never seen interest rates rise and who have never seen the interest rate risk and even thought about (it) and have concentrated on credit risk and have concentrated on liquidity risk, so it’s about time to prepare for a potential change,” Dombret said.

The former vice-chairman of Bank of America’s European global investment unit explained that the German central bank is taking interest rate rises “very seriously” and is “actively” working with German banks to ensure that changes to monetary policy will not disrupt them in any way. “Should there be sharp rises in interest rates that of course would be a challenge for any bank,” Dombret said. Members of the German central bank have been critical of the low interest rate environment in the euro zone, arguing this is hurting banks’ balance sheets. Earlier this month, Bundesbank President Jens Weidmann, called on the ECB to start tightening its monetary policy.

While China Hongqiao Group may be best known for being the world’s largest aluminum producer, it has in recent months featured just as prominently among short-seller reports who have accused the company of being a fraud. As the WSJ’s Scott Patterson writes, questions about China Hongqiao’s finances first emerged in November, when an anonymous short seller wrote on a website called Hongqiao Exposed that the company’s profits are “too good to be true.” China Hongqiao in the March 31 statement called the report “untrue and unfounded.” A subsequent 46-page report on Feb. 28 by Emerson Analytics, a trading firm focused on Chinese stock-market fraud, disclosed more allegations of fraud involving the Chinese commodity giant.

Emerson accused China Hongqiao of “abnormally high” profits generated by underreporting production costs and disclosing electricity expenses—one of the biggest costs for aluminum producers—as much as 40% below their true cost. Emerson said it investigated Chinese electricity costs, spoke to former China Hongqiao employees and compared the company’s costs and profits with other comparable companies.

Additionally, China Hongqiao has been more profitable than some Chinese competitors. For instance, China Hongqiao earned an average operating profit margin of 27% in the past five years, compared with minus-1.7% for state-owned Aluminum Corp. of China , known as Chalco, and 5.9% for Alcoa, according to FactSet. “People were always skeptical about how they managed to be more profitable than their peers,” said Sandra Chow, a credit analyst at CreditSights. And while China Hongqiao denied the Emerson report’s allegations and said it hired an investigative agency to look into the firm and people behind the claims, things are starting to unravel rapidly for the Chinese megacap.

As Patterson reports, China Hongqiao – the world’s biggest aluminum producer – is in trouble, locked in a feud with its accountant over fraud allegations that have forced it to suspend trading of its shares and seek help from the central government in Beijing. Just like in the case of its cow dairy peer, the problems emerged to the surface following the bearish 3rd party reports. Just days after the Emerson Analytics note, on March 4 China Hongqiao sought assistance from a trade group, the Chinese Non-Ferrous Metals Industry Association, or CNIA, saying the short sellers’ claims of inflated profits were forcing the company’s accountant, Ernst & Young, “to adopt an extremely conservative and careful attitude.” One wonders just whose books E&Y had been reviewing until that point if it took an outside party to bring attention to potential fraud at one of its biggest Chinese clients.

The value of China’s home sales remained buoyant in March, though volume figures indicated that curbs in a number of cities may be slowing the recent buying frenzy. New home sales by value rose 18% to 1 trillion yuan ($145 billion) last month from a year earlier, according to Bloomberg calculations based on data released Monday by the National Bureau of Statistics. The increase compares with a 23% surge in the first two months of the year. But the value of sales partly reflected surging home prices. By volume, home sales grew only 11% in March to 130 million square meters, according to Bloomberg calculations, below the 24% growth in the first two months of 2017. “The curbs are showing their effects,” said Liu Feifan at Guotai Junan Securities in Shenzhen, who predicted that sales growth will continue to slow.

Policy makers are seeking to clear a glut of unsold homes in smaller urban centers, while pledging to enforce strict curbs in most first- and second-tier cities to prevent a housing bubble. In a month when at least 64 cities announced new or stricter property-buying restrictions, some of the growth in home sales reflected buyers flocking into the market fearing they’d be ruled ineligible for future purchases. Investment in real estate development gained 9.4% in March from a year earlier, up from 8.9% in the first two months, according to Bloomberg calculations. Strong property investment helped China’s fixed-asset investment excluding rural areas expand 9.2% in the first quarter, accelerating from 8.1% growth last year.

Some of the growth represented a “delayed effect” from an earlier property boom, and the rate is likely to decelerate soon, Zhou Hao at Commerzbank wrote in a note after the data release. Liu at Guotai Junan said the increasingly high leverage that Chinese households have taken on for home purchase is “not sustainable.” New medium and long-term loans to households, made up mostly of mortgages, picked up again last month to 450.3 billion yuan, according to official data last Friday.

You probably have figured it out by now, but let me state it anyway. Ten years from now, if you’re reading this paper in a driverless car, it will be on a limited-access highway or a closed-off, experimental city circuit. You will not be thumbing through your text messages in a driverless car capable of carrying you anywhere, at all hours, in all weather conditions, over all kinds of roads. And even so, you will be expected to take over driving at a moment s notice. Ditto electric cars. If you own an electric car, you will be a member of a still-small minority. Electric-car owners will be people who own multiple cars or otherwise are willing to settle for a car with limited utility, suited for a daily commute but not a family trip or a long weekend. Even so, a new phenomenon will become apparent. After unexpected tie-ups on the interstate, tow trucks will routinely have to come and remove three or four Teslas that risked a long-distance trip and ran out of juice.

All this we offer as a discordant note amid the hype for electric cars and autonomous driving. Last week the market value of Tesla surpassed that of Ford and General Motors. Tesla is now the most valuable homegrown American car company, worth almost $US52 billion.Yet in the same week a reputable consultancy, Navigant Research, showed that Ford and GM lead all others, including Tesla and Google, in the autonomous car race. Shocking? Not really. These companies are making and selling cars, while the Silicon Valleyites have been mostly engaged in brand-building exercises based on public fascination with jazzy, futuristic auto technology. Google, the pioneer of self-driving hype, recently admitted it won’t build and sell a car after all. Google, though, still finds it pays to trundle its handful of robot cars on the exquisitely mapped streets of a few locales in perfect weather as obstacles to other motorists.

Apple reaped untold millions in free publicity based mainly on rumours and job postings for automotive engineers. Uber briefly suspended its own self-driving taxi experiment in three cities after an accident last month. Uber customers knew they were in a driverless car, by the way, because it had two drivers instead of one. The Wall Street Journal reported this week that Tesla’s triumph in the market-cap sweepstakes underscores the profound change occurring in the global automotive industry as Silicon Valley pursues a vision for transportation … that could up-end century-old competitors. Except that the stock prices of traditional car makers haven’t exactly been tanking. GM’s remains within yelling distance of its postbankruptcy high. Look at BMW, whose market cap Tesla nearly equals. Even if Tesla succeeds in its high-risk plan to ramp up annual production to 500,000 from 80,000 in a scant two years, it will sell a quarter as many luxury cars as BMW does, and has yet to show it can do so profitably.

On Good Friday, when markets were closed and when the entire financial world was tuned out, and when certainly no one was supposed to pay attention, Uber, the most highly valued – at $62.5 billion – and the most scandal plagued tech startup in the world, took the until now unprecedented step of disclosing its audited revenues and losses for the fourth quarter and for the full year of 2016. Rumors of ballooning losses for 2016 had been swirling since last summer. Bloomberg reported in August that Uber had lost “at least $1.2 billion” in the first half. In December, Uber’s loss in Q3 was said to “exceed $800 million,” according to Bloomberg, and its annual loss “may hit $3 billion.”

Others chimed in as some of Uber’s dozens of investors who’re getting its financial statements share them in dribs and drabs with the media. But on Friday, Uber itself disclosed that it lost $2.8 billion before interest, tax, depreciation, and employee stock options – the latter likely being a big chunk, as the earnings of publicly traded companies that award stock-based compensation, such as Twitter, regularly show. Translated into a net loss, including the expense for stock-based compensation? Dizzying. But Uber wisely didn’t disclose it. The Financial Times, which reported this disclosure, mused that Uber is “cementing its place as the most heavily-lossmaking private company in the history of Silicon Valley.”

In Q4 alone, it lost $991 million before interest, tax, depreciation, and stock-based compensation, up 5% from the losses in Q3 and nearly double its loss in Q1. However, as Uber has expanded at break-neck speed into more than 70 countries, stirring up numerous hornets’ nests of local and national laws and regulations, revenue soared over 200% from Q1 to reach $2.9 billion in Q4. For the whole year, revenue reached $6.5 billion. This is the image of its skyrocketing 2016 quarterly revenues and ballooning losses before interest, tax, depreciation, and stock-based compensation:

Five months have passed since the demonetisation drive, but the people of Srikakulam, Vizianagaram and Visakhapatnam continue to face shortage of cash in banks and ATMs. Sources said more than 90% of the ATMs in the region do not have cash while in the plains and Agency areas running dry. “The last date for paying my daughter’s tuition fees at Visakha Valley School was April 10, but I could not pay due to unavailability of cash. Moreover, the school does not have any online payment system,” said a worried P Srinivasa Rao. Speaking to TOI, State Bank of India (SBI) deputy general manager Ajoy Kumar Pandit said the customers are losing confidence in them due to the crisis.

“Nearly 70% of our 648 ATMs in the three districts are out of cash. The rest will also become dry in the next few days as we do not have cash to refill the machines. We are helpless from our side,” he said. A banking source said the RBI has diverted most of the cash to north India due to the recent elections. This has affected the southern parts of the country. “The government’s intention is to encourage smart payment systems, but the infrastructure is not up to the mark,” the source said. Many ATMs have not been upgraded with the new software required for handling the new Rs 500 and Rs 2,000 denominations, the source added.

The referendum has revealed the opposite of what Erdogan claims it has; namely, a dramatically divided Turkey. A powder keg. Recounts first? Is the judicial system still strong enough to order them? Changing a constitution with a 50% + 1 majority is questionable enough, since a constitution is supposed to be the result of many years of deliberation; in most places it would require 67% or even 75%. On top of that, this referendum was executed with many opposition politicians and many journalists behind bars. And even then only a very slim margin?!

An emboldened Recep Tayyip Erdogan followed his win in a referendum that ratified the supremacy of his rule by taking aim at political opponents at home and abroad. At his victory speech late on Sunday, supporters chanted that he should bring back the death penalty – a move that would finish off Turkey’s bid to join the EU – and Erdogan warned opponents not to bother challenging the legitimacy of his win. He told them to prepare for the biggest overhaul of Turkey’s system of governance ever, one that will result in him having even fewer checks on his already considerable power. “Today, Turkey has made a historic decision,” he said. “We will change gears and continue along our course more quickly.” The lira surged as much as 2.5% against the dollar in early trading on Monday in Istanbul before gains moderated.

The success of a package of 18 changes to the constitution was narrow, with about 51.4% of Turks approving it. It came at the end of a divisive two-month campaign during which Erdogan accused opponents of the vote of supporting “terrorists” and denounced as Nazi-like the decision of some EU countries to bar his ministers from lobbying the diaspora. “The referendum campaign was dominated by strongly anti-Western rhetoric and repeated promises to bring back the death penalty,” said Inan Demir at Nomura in London. “One hopes that this rhetoric will be tempered now that the vote is over,” but recent steps by the Turkish government do “not bode well for the hoped-for moderation in international relations.”

“It looks like the best outcome for financial markets because it gives the mandate, but not a strong mandate,” said Ozgur Altug, the chief economist at BGC Partners in Istanbul, who predicts stocks in Istanbul will rally about 7%. While markets looked favorably on the result as a sign political turmoil in the majority Muslim nation of 80 million people may settle down and help jumpstart the economy, Turkey’s biggest political party alleged fraud, demanding a recount after election officials accepted ballots without official stamps.

The EU’s rapporteur on Turkey, Kati Piri, said given the “unfair election environment,” EU accession talks will be suspended if the constitution is passed in its current form. The European Commission, in a statement, said the constitutional amendments, and their implementation “will be assessed in light of Turkey’s obligations” as an accession candidate and as a member of the Council of Europe. “You saw how the West attacked. But despite this, the nation stood tall, didn’t get divided,” Erdogan told his supporters, while calling on Turks who opposed him to “stop tiring themselves out” and accept the course the country is headed on.

The unreliability of Chinese official economic data has become almost a cliche. A few years before he became China’s premier, Li Keqiang said that the country’s numbers were “man-made” and “for reference only.” If the top economic policy maker of a country says that the numbers aren’t reliable … well, you believe him. But how unreliable? [..] Economic number-fudging is a cheap way to prevent jittery investors from making a stampede for the exits. Of course, knowing this, a number of people have tried to estimate China’s true growth rate. Tom Orlik, Bloomberg’s chief Asia economist, recently rounded up a number of independent figures, and collected them in the following chart:

The numbers range from Lombard Street’s pessimistic figure of a bit more than 3% to Bloomberg Intelligence’s optimistic number of just under 7%. In other words, there is a wide band of uncertainty here. But I would like to suggest a scenario even more pessimistic than the lowest of the numbers above. After reading reports by Peking University professor Chris Balding on the state of China’s financial sector, I think there’s a possibility that China’s growth is lower even than 3%. Chinese electricity usage is growing at more like 1%. Rail freight traffic, though volatile, has suffered some dizzying drops in recent months. These are traditional proxies for heavy industry output. That they are barely growing, if at all, implies that much of Chinese industry has ground to a halt.

China bulls, of course, will argue that the country is merely in the middle of a transition from industry to services, and from wasteful power usage to greater efficiency. That is probably true. But the speed of the transition would have to be incredible to make up for the precipitate drop in industrial activity. Why would China’s service sector and energy efficiency suddenly skyrocket immediately following the bursting of a major stock bubble? One reason is government spending. A stealth stimulus is underway. But another big part of the equation is the financial sector, which has logged stunning growth in recent months despite the stock crash. Why are Chinese financial services growing? Loan growth alone will not do the trick – banks need to be paid in order to log revenue. Or do they? Chris Balding reports:

“[S]ome Chinese researchers…compared the loan payments made by firms to the amount owed to banks…[Their findings imply] that Chinese firms are paying only half the financial costs they should be paying…The amount of revenue that banks are recording from loans is nearly four times the cost firms are associating with those loans…[B]ank revenue [has been] outpacing firm financial cost growth by a factor of almost four.” In other words, the amount of loan payments Chinese banks say they are receiving is a whole lot more than the amount Chinese borrowers say they are paying. If Balding’s numbers are to be believed – and of course, they are only one glimpse into a murky financial system – a large portion of the recent growth surge of China’s financial services sector may simply be fake.

China, the world’s leading emitter of greenhouse gases from coal, is burning far more annually than previously thought, according to new government data. The finding could vastly complicate the already difficult efforts to limit global warming. Even for a country of China’s size and opacity, the scale of the correction is immense. China has been consuming as much as 17% more coal each year than reported, according to the new government figures. By some initial estimates, that could translate to almost a billion more tons of carbon dioxide released into the atmosphere annually in recent years, more than all of Germany emits from fossil fuels. Officials from around the world will have to come to grips with the new figures when they gather in Paris this month to negotiate an international framework for curtailing greenhouse-gas pollution.

The data also pose a challenge for scientists who are trying to reduce China’s smog, which often bathes whole regions in acrid, unhealthy haze. The Chinese government has promised to halt the growth of its emissions of carbon dioxide, the main greenhouse pollutant from coal and other fossil fuels, by 2030. The new data suggest that the task of meeting that deadline by reducing China’s dependence on coal will be more daunting and urgent than expected, said Yang Fuqiang, a former energy official in China who now advises the Natural Resources Defense Council. “This will have a big impact, because China has been burning so much more coal than we believed,” Mr. Yang said. “It turns out that it was an even bigger emitter than we imagined.

This helps to explain why China’s air quality is so poor, and that will make it easier to get national leaders to take this seriously.” The adjusted data, which appeared recently in an energy statistics yearbook published without fanfare by China’s statistical agency, show that coal consumption has been underestimated since 2000, and particularly in recent years. The revisions were based on a census of the economy in 2013 that exposed gaps in data collection, especially from small companies and factories. Illustrating the scale of the revision, the new figures add about 600 million tons to China’s coal consumption in 2012 — an amount equivalent to more than 70% of the total coal used annually by the United States.

China—not the prospect of the first rate hike from the Federal Reserve in almost a decade—is what keeps investors up at night. Barclays surveyed 651 of its clients around the world to glean their biggest fears, as well as their thoughts on commodities, yields, currencies, and other questions about the market outlook. “Only 7% sees Fed normalization as the main risk for markets over the next 12 months, compared with 36% whose main worry is China,” said Guillermo Felices, head of European asset allocation. The share of investors who judged softness in China and other developing economies to be the biggest risk to markets spiked in the third quarter, the period in which Beijing unexpectedly moved to devalue the yuan. The elevation in concern over growth in China and the rest of the developing world coincided with a rise in the share of investors who think deflation is a larger risk to the markets than inflation.

China’s devaluation sparked similar moves from other nations that had pegged their currencies to the greenback. All else being equal, this process engenders a stronger U.S. dollar and weaker commodity prices, thereby exerting downward pressure on headline inflation rates. As such, investors’ reactions to the Fed’s Oct. 28 statement, which resulted in an increase in the implied odds of a December rate hike, may not fully be reflected in its results. Nonetheless, roughly 40% of those surveyed indicated that they expected the Fed to initiate its tightening phase before the year was out. A plurality of respondents think liftoff will be a negative for risk assets, though only for a short period. “Indeed, the risk of Fed policy withdrawal is at a two-year low, suggesting complacency about the threat of higher rates,” warned Felices.

By far the most worrying debt in China is held by the corporate sector. Total borrowing by the nonfinancial sector shows that the total debt-to-GDP ratio has reached 240% of GDP as of the first quarter of 2015. The corporate debt-to-GDP ratio was 160% of GDP, or $16.7 trillion as of the first quarter of 2015, and total corporate liabilities up to 200% of GDP when including corporate debt securities (bonds). For some perspective, the corporate debt-to-GDP ratio in the United States is 70%, less than half that of China’s. China’s economy has seen some cyclical scares this year (think stock market and currency), but high corporate debt is a structural issue, potentially leading to a period of slower expansion of credit in an effort to reduce the debt-to-GDP ratio weighing on rapid growth.

Corporate debt has risen faster than expected. As noted in an earlier blog post, in 2013, Standard & Poor’s predicted that China’s corporate debt would be between 136 and 150% of GDP by 2017. This year Standard & Poor’s said China’s corporate debt has already reached 160% of GDP, a figure in line with data from the Bank of International Settlements. Yu Yongding, a senior fellow at the Chinese Academy of Social Sciences (CASS), has calculated that without any fundamental change in the current situation, the corporate debt-to-GDP ratio will reach 200% by 2020. Increased borrowing by state-owned enterprises (SOEs) has contributed significantly to this rise, and SOEs account for around half of all the corporate debt in China. But problematically, SOEs have a much lower return on assets than private firms, as low as one-third.

Which begs the question: If a large SOE is unable to pay its interest payments, what will the government do? Will it take control of the debt, and will the debt therefore be counted as government rather than corporate debt? This would do nothing to the overall credit-to-GDP ratio but may cause moral hazard. Besides corporate debt from bank loans, China has seen dramatic growth of the corporate bond market. Overall this growth is seen as a positive move, as it means the firms are either refinancing old loans with bonds at lower yields or simply expanding their balance sheets using the bond market rather than bank loans. Also helpful is that the majority of corporate bonds in China are in renminbi, protecting them from foreign exchange fluctuations. The IMF reports that total bond issuance in China in 2014 was over $600 billion.

Real estate, construction, mining, and energy production have been leading the increase in leverage. These cyclical sectors loaded up on credit after the 2008 financial crisis and have some of the most highly leveraged firms in China. The rise in corporate debt in China is one of the most pressing issues for future growth. A drop in corporate revenue could prompt a number of defaults, lowering overall economic growth and reducing revenue further—a vicious cycle. Potential headwinds include normalizing interest rates in the United States, decreasing capital efficiency, disinflation, or a property market slowdown. Moreover, banks lend about half of their loans to corporations, so a rise in corporate defaults could have broader banking implications, including liquidity concerns and nonperforming loans.

Alcoa’s latest aluminum-making cutback is signaling the end of the iconic American industry. For 127 years, the New York-based company has been churning out the lightweight metal used in everything from beverage cans to airplanes, once making it a symbol of U.S. industrial might. Now, with prices languishing near six-year lows, it’s wiping out almost a third of domestic operating capacity, Harbor Intelligence estimates. If prices don’t recover, the researcher predicts almost all U.S. smelting plants will close by next year. While that’s a big deal for the U.S. industry and the people it employs, it doesn’t mean much for global supplies. Alcoa’s decision to eliminate 503,000 metric tons of smelting capacity accounts for about 31% of the U.S. total for primary aluminum, but less than 1% of the global total, according to Harbor.

For more than a decade, output has been moving to where it’s cheaper to produce: Russia, the Middle East and China. A global glut has driven prices down by 27% in the past year, rendering American operations unprofitable and accelerating the pace of the industry’s demise. “You’ve seen a fair clip of closures in the U.S., that is just unfortunate, but a development that’s very difficult to change,” Michael Widmer at Bank of America said. “It means you’ll just have to purchase from somewhere else.” That’s exactly what Jay Armstrong, the president of Trialco is doing. The company, which turns aluminum into finished manufactured products, now buys about 80% of the supplies it turns into car wheels from overseas. That’s up from 40% five years ago, he said. “It’s not the kind of business where we’re going to pay more and buy all American,” Armstrong said in a telephone interview. “It’s too competitive a business to do that.”

China’s president signaled policy makers will accept slower growth, but not much slower, as details of a blueprint set to define his term as leader were released Tuesday. Annual growth should be no less than 6.5% in the next five years to realize the goal to double 2010 gross domestic product and per capita income by 2020, President Xi Jinping said Tuesday, according to the official Xinhua News Agency. The 13th five-year plan, details of which were announced Tuesday, is the first to confront an era of sub-7% economic growth since Deng Xiaoping opened the nation to the outside world in the late 1970s. “Policy makers still want to maintain a high growth pace, while the policy expectation is tuned slightly lower,” said Tao Dong at Credit Suisse in Hong Kong.

“The stance of policy makers is to gradually transform to a ’new normal.’ But to maintain the peoples’ confidence, the bar is set relatively high.” China will seek to increase the yuan’s convertibility in an orderly manner by 2020 and change the way it manages currency policy, according to the Communist Party’s plan. Authorities will opt for a “negative list” foreign-exchange system – an approach that lets companies do anything that’s not specifically banned – and open the finance industry as it promotes the yuan’s inclusion in the International Monetary Fund’s Special Drawing Rights basket, Xinhua reported. The proposals coincide with heightened anxiety over China’s economic outlook following a stock market slump and a surprise yuan devaluation in August that roiled global markets.

China will target medium- to high-speed growth during the period, and officials pledged to reduce the income gap, further open up to overseas investment and boost consumption, according to the draft. Officials said they will accelerate financial system reform and promote transparent and healthy capital markets while also overhauling stock and bond sales. They’ll continue reforms of the fiscal and tax systems and transfer some state capital to pension funds. [..] Xi’s growth baseline matches guidance provided by Premier Li Keqiang, who said Sunday that China needs average growth of more than 6.5% in the next five years to meet the goal of achieving a “moderately prosperous” society by 2020. Xi and Li are managing the priorities of both reforming the economy and keeping short-term growth fast enough so that structural changes don’t cause a hard landing.

Growth of only 6.5% a year in 2016-2020 will be enough for China to meet its wealth goals, President Xi Jinping said on Tuesday according to the official news agency Xinhua. The report came as the ruling Communist party issued guidelines for the next five-year plan for the world’s second-largest economy, whose slowing growth has alarmed investors worldwide. The first documents released by the leadership conclave did not include a numerical growth target. But Xinhua cited Xi as saying that annual growth should be no less than 6.5% in the next five years to achieve the Communist Party’s aim of doubling GDP per capita from 2010 by the end of the decade. It said he made the remarks in a speech, without giving direct quotes. The doubling target is part of achieving what China’s ruling party calls a “moderately prosperous society” in time for the 100th anniversary of its foundation.

The comments are the clearest indication yet that Beijing will reduce its target growth rate from the current “around 7%”, after expansion slowed last quarter to its lowest in six years. Some economists say that the current figure is unattainable going forwards, and that trying to do so risks derailing painful but necessary markets reforms. The country has faced economic turbulence in recent months as it attempts to transition its economy from years of super-charged growth to a more modest pace it has dubbed the “new normal”. Botched stock market interventions and a sudden currency devaluation have rattled confidence in the country’s leadership, which has staked its legitimacy on maintaining an aura of economic infallibility.

The ranks of China’s wealthy continue to surge. As their economy shows signs of weakness at home, they’re sending money overseas at unprecedented levels to seek safer investments — often in violation of currency controls meant to keep money inside China. This flood of cash is being felt around the world, driving up real estate prices in Sydney, New York, Hong Kong and Vancouver. The Chinese spent almost $30 billion on U.S. homes in the year ending last March, making them the biggest foreign buyers of real estate. Their average purchase price: about $832,000. Same trend in Sydney, where Chinese investors snap up a quarter of new homes and are forecast to double their spending by the end of the decade. In Vancouver, the Chinese have helped real estate prices double in the past 10 years.

In Hong Kong, housing prices are up 60% since 2010. In total, UBS Group estimated that $324 billion moved out last year. While this year’s numbers aren’t yet in, during the three weeks in August after China devalued its currency, Goldman Sachs calculated that another $200 billion may have left. So how do these volumes of cash get out when Chinese are limited by rules that allow them to convert only $50,000 per person a year? The methods include China’s underground banks, transfers using Hong Kong money changers, carrying cash over borders and pooling the quotas of family and friends – a practice known as “smurfing.” The transfers exist in a gray area of cross-border legality: What’s perfectly legitimate in another country can contravene the law in China.

“It’s not legal for people to use secret channels to move money abroad, because this is smuggling,” says Xi Junyang, a finance professor at Shanghai University of Finance & Economics. “But the government has kept a laissez-faire attitude until recently.” Now, policy makers are starting to take the outflow seriously. While it’s not about to run out of money, China has intensified a crackdown on underground banks that illegally channel cash abroad. It’s also trying to capture officials suspected of fleeing overseas with government funds. Longer term, China has pledged to remove its currency controls and make the yuan fully convertible by 2020.

As China’s growth sputters, the troubles at Standard Chartered are another bad omen for what were once Asian economic darlings. The bank, which generates most of its income in the region, had gambled on success in emerging markets such as India, which instead saddled the lender with delinquent loans. As a result, the company which opened its offices in Mumbai under Queen Victoria is now axing 15,000 jobs and is asking investors for $5.1 billion. “Standard Chartered are Asian specialists and are in all the main markets in the region, so in looking at them you can get a good sense for credit direction and lending appetite,” said Mark Holman at TwentyFour Asset Management. For now, Asia still has fewer corporate debt defaults than other developing countries, but rising leverage from India to Indonesia point to the risk of further nonpayments.

More stringent conditions from banks like Standard Chartered are slowing loan growth in the region, exposing more fissures in the corporate credit market. “The picture that emerges is that Asian credit cycles are far more advanced than those in Europe and loan losses and impairment charges are mounting,” Holman said. Like other developing nations, Asian companies took advantage of low interest rates overseas to go on a borrowing binge. The move is backfiring as slower economic growth makes it more difficult to pay back the obligations. Fitch Ratings warned on Nov. 2 that 11% of India’s loans will fall into the category of “stressed assets” in the fiscal year ending in March 2016 and only improve “marginally” the next year. In China, Sinosteel, a state-owned steelmaker, missed an interest payment last month, becoming the latest firm that teeters on the verge of default.

The crisis at Volkswagen has deepened after the carmaker found “irregularities” in the carbon dioxide levels emitted by 800,000 of its cars. An internal investigation into the diesel emissions scandal has discovered that CO2 and fuel consumption were also “set too low during the CO2 certification process”, the company admitted on Tuesday night. The dramatic admission raises the prospect that VW not only cheated on diesel emissions tests but CO2 and fuel consumption too. VW said it estimated the “economic risks” of the latest discovery at €2bn (£1.42bn). The company said the “majority” of cars involved have a diesel engine, which implies that petrol cars are involved in the scandal for the first time.

Matthias Müller, chief executive of VW, said: “From the very start I have pushed hard for the relentless and comprehensive clarification of events. We will stop at nothing and nobody. This is a painful process, but it is our only alternative. For us, the only thing that counts is the truth. That is the basis for the fundamental realignment that Volkswagen needs.” VW said it will now work with the authorities to clarify what took place during the CO2 tests and “ensure the correct CO2 classification for the vehicles affected”. Müller added: “The board of management of Volkswagen AG deeply regrets this situation and wishes to underscore its determination to systematically continue along the present path of clarification and transparency.”

VW has already admitted fitting a defeat device to 11m vehicles worldwide that allowed them to cheat tests for emissions of nitrogen oxides. The carmaker has put aside €6.7bn to meet the cost of recalling the 11m vehicles, but also faces the threat of fines and legal action from shareholders and customers. The company has hired the accountancy firm Deloitte and the law firm Jones Day to investigate who fitted the device into its vehicles. It is understood that the carmaker believes a group of between 10 and 20 employees were at the heart of the scandal.

Volkswagen said it found faulty emissions readings for the first time in gasoline-powered vehicles, widening a scandal that so far had centered on diesel engines. Separately, the company’s Porsche unit said it’s halting North American sales of a model criticized by U.S. regulators. Volkswagen said an internal probe showed 800,000 cars had “unexplained inconsistencies” concerning their carbon-dioxide output. Previously, the automaker estimated it would need to recall 11 million vehicles worldwide — more than Volkswagen sold last year. It was unclear how much overlap there was between the two tallies. The company said the new finding could add at least €2 billion to the €6.7 billion already set aside for fixes to the affected vehicles but not litigation, fines or customer compensation.

The crisis that emerged after Volkswagen admitted in September to cheating U.S. pollution tests for years with illegal software has shaved more than one-third of the company’s stock price and led to a leadership change. Today’s revelation adds to the pressure on Volkswagen’s new chief executive officer, Matthias Mueller, who replaced Martin Winterkorn and was previously head of Porsche. Volkswagen’s supervisory board said it will meet soon to discuss further measures and consequences. “VW is leaving us all speechless,” said Arndt Ellinghorst, a London-based analyst with Evercore ISI. [..] The 3.0-liter diesel motors targeted on Monday by a U.S. Environmental Protect Agency probe aren’t part of the latest finding. The company rejected allegations that its cheating on diesel-emissions tests included Porsche and other high-end vehicles.

The EPA said its new investigation centers on the Porsche Cayenne and VW Touareg sport utility vehicles and as well as larger sedans and the Q5 SUV from Audi. But then late Tuesday, Porsche’s North American division said it would voluntarily discontinue sales of diesel-powered Cayennes from model years 2014 to 2016 until further notice. The Atlanta-based unit’s statement reiterated that the EPA notice was unexpected and that owners can operate their vehicles normally. “We are working intensively to resolve this matter as soon as possible,” Porsche said in the statement.

Volkswagen on Tuesday said it had understated the fuel consumption of 800,000 cars sold in Europe, while majority stakeholder Porsche Automobil Holding warned that VW’s latest findings could further weigh on its results. The latest revelation about fuel economy and carbon dioxide emissions, which Germany’s largest automaker said represented a roughly €2 billion economic risk, deepened the crisis at VW. The scandal initially centered on software on up to 11 million diesel vehicles worldwide that VW admitted vastly understated their actual emissions of smog-causing pollutant nitrogen oxide. U.S. environmental regulators said on Monday that similar “defeat devices” were installed on larger 3.0 liter engines used in luxury sport utility vehicles from Porsche and Audi, although VW has denied those allegations.

Porsche’s North American unit said it was discontinuing sales of Porsche Cayenne diesel sport utility vehicles until further notice, citing the allegations. The latest findings that VW understated fuel consumption and carbon dioxide emissions, areas which U.S. regulators have yet to address, were disclosed as VW continues a broad review of its handling of all pollution-related issues. While the findings mostly apply to smaller diesel engines, one gasoline-powered engine is also affected. “VW is leaving us all speechless,” said Arndt Ellinghorst of banking advisory firm Evercore ISI. “It seems to us that this is another issue triggered by VW’s internal investigation and potentially related to Europe.” The carmaker said it would immediately start talking to “responsible authorities” about what to do about the latest findings.

In his latest letter, he valiantly trudges on down the path of bullish abandon and tries to convince if not so much others as himself why continuing his desertion of the bearish camp he did two years ago is the right thing to do, and how in the aftermath of the VIX explosion in August, he “learned to stop worrying and love the bomb.” Key highlights:

… it is ironic that we are perhaps best known for advising “that you panic”. However, if you are anxious at the wrong time it can prove very painful. Today, we would advise that you don’t panic!

… by withdrawing the “Greenspan put” and using their asset purchase schemes to eviscerate any notion of value, the authorities have paradoxically created a safer yet more paranoid market.

… first it was Europe, then the high yield credit space with the vulnerabilities of the shale oil issuers, and then it was back to Greece and then the mother of them all, China, with its falling property and stock prices seemingly knocking economic growth and making a sizeable devaluation inevitable. And yet nada… the weeping prophets have failed to force a crisis after one hell of a go.

… perhaps we are being premature and the cards are about to fall. Or perhaps there simply are no dead bodies in the system and the global economy has proven itself much more resilient to shocks. We certainly believe that if we had been forewarned two years ago that the dollar would rise versus selected EM currencies by 50% and that important commodities such as oil and iron ore would fall by 50% we would never have been able to predict just how orderly things have turned out at both the company and sovereign level. The turmoil it seems has remained contained within financial markets in a very curious way.

… perhaps it’s time to stop worrying and love the bomb?

Actually at last check, practically all the “bears” predicted exactly what happened: trapped by their own policies, central banks would have no choice than to unleash another onslaught of easing. This is precisely what happened when first the ECB previewed its QE2, then the PBOC cut rates, then Sweden boosted QE, then the BOJ said it would “not hesitate” to act (and would have done so had other central banks not pushed the Yen lower thanks to its carry trade status). The real question, Hugh, is how much time did the latest doubling down by the world’s central banks buy? We should know the answer in 2-4 months.

Businesspeople in today’s world are either concerned, actively sweating or oblivious to the rumblings and dangers around them. We recommend that both investors and businesspeople be highly alert to the implications of populism, the increasing concentration of power into the hands of unaccountable elites and the dissipation of the rule-of-law protections of liberty. It is very odd and dangerous that governments, satisfied with policies which, by raising asset prices (stocks, bonds, real estate, high-end art), are seemingly designed to make the rich richer, nevertheless simultaneously excoriate inequality as the cause of slow growth and societal disquiet. It is also strange that policymakers are not concerned by the obvious failure of monetary extremism to achieve the predicted levels of growth, or by the risks that may exist either in the continuation of the monetary experiment or in its ultimate unwinding.

Policymakers who are sticking with the failed policy mix have invented creative explanations for why growth has been so bad for such a long a period of time. The most prevalent (and tautological) of these explanations is “secular stagnation,” a theory that the developed world simply cannot grow faster due to ageing populations, growth-destructive technologies and competition from cheap labor around the world. We disagree with this theory, and assert that it can be examined for validity only after a full range of first-line “fiscal” policies (as we have defined them) has been put firmly and comprehensively in place. In contrast to the “secular stagnationistas,” we believe that there is a great deal of low-hanging fruit (that is, far higher rates of growth in incomes, jobs and national wealth) to be had from simple changes in leadership and policies.

The question of the day is: What will be the policy response of the developed world toward the currently deteriorating (at least in EMs and China) conditions, and the policy response if the deterioration spreads to Europe and the U.S.? If we know anything about the policy decision-making landscape in developed countries, it is that policymakers are all on super-keen-alert for signs of deflation (which they basically equate with credit collapse — a false and misleading connection, but that is a topic for another day). They will not remain passive in the face of a renewed global recession and/or financial crisis. So what will they do next, and how will it affect global markets? We can be reasonably certain that policymakers will not leap into action on the fiscal measures that we have described as the front-line policies needed to meaningfully quicken economic growth. Try to imagine more flexible and business-friendly tax, regulatory and labor policies being enacted by current political leadership in the U.S., Europe and Japan.

Sorry, our imaginations — never inert — just can’t get there. What policymakers will do, in all likelihood, is hope and pray, and when that fails, they will likely double down on monetary extremism. This landscape is essentially baked, unless you think that sometime in the near future the global economy will turn higher, either on its own or in anticipation of such policy measures in the future. To many policymakers today, jawboning seems like a magic button, since markets often create the desired result in anticipation of possible future actions. Consequently, governments may be able to get a particular outcome without requiring the central bankers to actually take any action.

Standard Chartered became the third European bank in less than two weeks to announce sweeping job cuts, bringing the total planned reductions to more than 30,000, or almost one in seven positions. The London-based firm said Tuesday it will eliminate 15,000 jobs, or 17% of its workforce, as soaring bad loans in emerging markets hurt earnings. Deutsche Bank last week announced plans for 11,000 job cuts, while Credit Suisse said it would trim as many as 5,600 employees. The three firms, which all named new chief executive officers this year, are undertaking the deepest overhauls since the financial crisis as stricter capital rules erode profitability. Standard Chartered and Credit Suisse will tap shareholders for funds, while Deutsche Bank scrapped its dividend for this year and next to conserve capital.

“It’s just further evidence that Europe’s banks didn’t adapt quickly enough to the post-crisis world and are now playing catch up,” said Christopher Wheeler at Atlantic Equities in London. More bloodletting may be on the way. UniCredit is considering as many as 12,000 job cuts as it seeks to improve profit and capital levels, people with knowledge of the discussions said last week. The numbers, which are still under review, increased from 10,000 a month ago and may change depending on the outcome of asset sales. The largest Italian bank reports earnings next week. Including jobs lost through asset sales, John Cryan, Deutsche Bank’s co-CEO since July, intends to eliminate 26,000 employees, or a quarter of the workforce, by 2018. Tidjane Thiam, Credit Suisse’s new CEO, will shed jobs in the U.S., U.K. and Switzerland.

What are the consequences of regulators leaving government work to join the financial services industry, and vice versa? Nomi Prins, a Senior Fellow at Demos, chronicles the problems of the revolving door between Washington and Wall Street in her latest book “All the Presidents’ Bankers.” “The difference is that now people know each other less in their personal lives before they make those transitions,” she says. “Now it’s a little more like ‘I know you from the industry of Wall Street and Washington’ as opposed to ‘We hung out and our dads smoked cigars together.’ Prins notes that there was more personal accountability in the relationships between Wall Street and Washington during the mid-20th century.

She points out that before the crash of 1929, the Morgan bank (predecessor of J.P. Morgan) had strong connections with Presidents Coolidge and Hoover. Yet, a shift in the relationships occurred during the Great Depression. “There was this accountability moment where the bankers that ascended to run these banks, to run Chase, to run Citibank & they wanted economic stability throughout the country,” she says. “They actually thought [stability] was important for confidence in the banking system & people would actually keep their money there and trust that they had a future with this bank, so the relationships with individuals and corporations and countries all mattered.” Prins says that the modern-day deterioration of the bank-customer relationship is a direct result of the growing size and risk profiles of bank behemoths.

“The banks are so big right now [and] they have access to so much of apercentage of the deposits of individuals, she says. “The leverage is so much higher on the back of those deposits, the bailouts that have happened for numerous reasons in the past 25 years have all been an indication that is okay to take more reckless bets.” And while the idea of banks being “too big to fail” caused widespread Main Street anger towards Wall Street, Prins believes the policy of government bailouts will continue post-Financial Crisis as banking has become more concentrated. She noted that the big six banks (J.P. Morgan, Citi, Bank of America, Goldman Sachs, Morgan Stanley, Wells Fargo) in this country control 97% of all trading assets in the U.S. and 93% of all derivatives.

Prins also added that the anti-banking rhetoric of many U.S. Presidents (remember President Obama’s Wall Street “fat cats”?) has a long history, but one that is at odds with actual policy. It goes all the way back to Woodrow Wilson and the creation of the Federal Reserve, she said. “In practice Woodrow Wilson was behind the creation of the Fed, which we know now has substantiated a lot of Wall Street losses, has a $4.5 trillion book. It’s the largest hedge fund in the world right now…But [Dodd Frank] hasn’t fundamentally changed the concentration of power. The revolving door…influences the risk inherent to what’s going on on Wall Street. It hasn’t made the economy more stable with respect to the banking industry, which is an industry that infiltrates every aspect of our individual and political lives.

What have governments learned from the financial crisis? I could write a column spelling it out. Or I could do the same job with one word: nothing. Actually, that’s too generous. The lessons learned are counter-lessons, anti-knowledge, new policies that could scarcely be better designed to ensure the crisis recurs, this time with added momentum and fewer remedies. And the financial crisis is just one of the multiple crises – in tax collection, public spending, public health and, above all, ecology – that the same counter-lessons accelerate. Step back a pace and you see that all these crises arise from the same cause. Players with huge power and global reach are released from democratic restraint. This happens because of a fundamental corruption at the core of politics.

In almost every nation the interests of economic elites tend to weigh more heavily with governments than do those of the electorate. Banks, corporations and landowners wield an unaccountable power, which works with a nod and a wink within the political class. Global governance is beginning to look like a never-ending Bilderberg meeting. As a paper by the law professor Joel Bakan in the Cornell International Law Journal argues, two dire shifts have been happening simultaneously. On one hand governments have been removing laws that restrict banks and corporations, arguing that globalisation makes states weak and effective legislation impossible. Instead, they say, we should trust those who wield economic power to regulate themselves.

On the other hand, the same governments devise draconian new laws to reinforce elite power. Corporations are given the rights of legal persons. Their property rights are enhanced. Those who protest against them are subject to policing and surveillance – the kind that’s more appropriate to dictatorships than democracies. Oh, state power still exists all right – when it’s wanted. Many of you will have heard of the Trans-Pacific Partnership and the proposed Transatlantic Trade and Investment Partnership (TTIP). These are supposed to be trade treaties, but they have little to do with trade, and much to do with power. Theyenhance the power of corporations while reducing the power of parliaments and the rule of law. They could scarcely be better designed to exacerbate and universalise our multiple crises – financial, social and environmental.

But something even worse is coming, the result of negotiations conducted, once more, in secret: a Trade in Services Agreement (TiSA), covering North America, the EU, Japan, Australia and many other nations. Only through WikiLeaks do we have any idea of what is being planned. It could be used to force nations to accept new financial products and services, to approve the privatisation of public services and to reduce the standards of care and provision. It looks like the greatest international assault on democracy devised in the past two decades. Which is saying quite a lot.

German Chancellor Angela Merkel warned that fighting could break out in the Balkans, along the main route of migrants trying to reach Europe, if Germany closed its border with Austria, in remarks published Tuesday. Amid ever-louder calls for Merkel to undertake drastic action to stem the tide of people entering her country, she again rejected the appeals, noting that tensions were already running high between the Western Balkans countries. With an eye to deep rifts exposed after Hungary closed its frontier with Serbia and Croatia, Merkel said blocking the border with Austria to refugees and migrants would be reckless. “It will lead to a backlash,” Merkel was quoted in media reports as saying late Monday in an address to members of her conservative Christian Democratic Union (CDU) in the western city of Darmstadt.

“I do not want military conflicts to become necessary there again,” Merkel added, referring to the Balkans. She said disputes in a region already ravaged by war in the 1990s could quickly escalate, touching off a cycle of violence “no one wants.” Germany has become the main destination for people fleeing war and poverty in the Middle East, Africa and Asia via the Balkans, with up to one million people expected this year. The EU vowed last month to help set up 100,000 places in reception centres in Greece and along the migrant route through the Balkans as part of a 17-point action plan devised with the countries most affected by the crisis. But just as Merkel attempts to convince European partners to share out the burden more fairly, she has faced a revolt from within her own conservative alliance against the welcome she has extended to people escaping violence and persecution.

EU member states have so far relocated only 116 refugees of the 160,000 they are committed to relocating over the next two years, according to new figures. EU members states agreed in September to relocate 160,000 people in “clear need of international protection” through a scheme set up to relocate Syrian, Eritrean, and Iraqi refugees from the most affected EU states – such as Italy and Greece – to other EU member states. So far 116 people have been relocated, and only 1,418 places have been made available by 14 member states, according to data released on Tuesday by the European Commission. A total of 86 asylum seekers have been relocated from Italy, and 30 asylum seekers will travel from Athens to Luxembourg on Wednesday.

Denmark, Ireland and the UK have an opt-out from the scheme, but Britain is the only member state that has said it will not contribute to the relocation. The EU’s emergency relocation mechanism is only one facet of the broader refugee crisis. Syria, Iraq and Eritrea account for the majority of those crossing the Mediterranean. According to the UNHCR, more than one in two are fleeing from Syria. While 6% of those arriving via the Mediterranean are originally from Iraq, and 5% from Eritrea. Not all those seeking asylum remain or travel via Italy or Greece. About 770,000 asylum applications were lodged across the EU in the first nine months of 2015, compared to 625,920 in all of 2014 and 431,090 in 2013. This has contributed to a backlog of applications.

At the end of last year there were just under 490,000 pending applications across EU member states. In July of this year, the figure stood at 632,000. The backlog is not showing signs of receding any time soon: for every asylum decision made there are 1.8 new applications. Approximately 240,000 applications were processed between January and June this year. Over the same six months, 432,345 applications were filed. However, the European Commission data also reveals that beyond the logistical challenges, a “large number of member states has yet to meet financial commitments” and “too few member states” have responded to calls to help Serbia, Slovenia and Croatia; among the most used routes by asylum seekers, with essential resources such as beds and blankets.

Greece’s coast guard says the total number of people rescued from a boat carrying people from Turkey to the nearby Greek island of Lesvos has increased to 65, while a total of five bodies were recovered from the water. The coast guard said Wednesday that the bodies were those of three children and two men. There were no further missing people reported. The migrant boat ran into trouble north of Lesvos Tuesday night. The coast guard says a total of 457 people were rescued between Tuesday morning and Wednesday morning in 13 separate incidents. More than 600,000 people have arrived in Greece so far this year, with most arriving on Lesbos. From there, they make their way to the Greek mainland on ferries and then head overland to more prosperous EU countries in the north. Thousands of migrants are stranded on Lesvos due to a ferry strike that began Monday.

Sharemarkets around the world are as well-trained as Pavlov’s dogs. This time, it was the European Central Bank giving them good news with the pledge of more cheap money – and it didn’t take them long to start salivating again. But in the next few weeks it could just as easily be the Federal Reserve talking about taking that cheap money away, and sharemarkets may well retreat whimpering with their tail between their legs. Friday was definitely a salivating day, however, sparked by the inevitable rally in Europe and on Wall Street after the ECB said it was on alert to adjust the “size, composition and duration” of its quantitative easing policy. Each month the bank buys €60 billion of predominantly government bonds and it will keep doing this until at least September 2016.

It’s now been just over three years since Mario Draghi, the ECB’s president, said he would do whatever it takes to hold the euro together and since then the S&P 500, and a benchmark of Europe’s top 50 stocks, have increased by more than 50%. The major S&P ASX 200 index is up around 30% over that same period. But apart from the United States, economic growth in Europe and Australia has been hard to come by while earnings from companies has been very sluggish. Sharemarkets don’t rise and fall precisely in line with economic activity, they are more a forward-looking indicator and, despite lots of requests to do so, no one rings the bell or waves the white flag when the sharemarket hits the top or bottom. But for the past three years or so growth forecasts have been revised down and bond yields have tumbled, implying that all is not well, and yet there has been no break in the sharemarket’s psychology; shares are the place to be.

Global currency wars are back on in earnest, with the euro tumbling after ECB boss Mario Draghi signalled the bank stood ready to boost the “size, composition and duration” of the bank’s bond-buying program. The ECB’s move to boost its monetary stimulus, which drives down eurozone bond rates and puts downward pressure on the euro, comes as US Federal Reserve board members appear deeply divided on whether to proceed with plans to raise US interest rates this year. While the Fed dithers, the market has already ruled out an interest rate cut this year, which has pushed lower both US bond yields and the greenback. But as it grapples with feeble economic activity and inflation falling into negative territory, the last thing the ECB wants is to see the euro strengthening against the US dollar.

A stronger euro will act as a drag on eurozone growth, because it will make the region’s exports more expensive in global markets. And the ECB cannot stand by idly and watch as the slight progress it has made in terms of boosting economic activity is destroyed by a strong currency. As a result, Draghi has little choice but to fire up the printing presses even more by signalling that the central bank’s €1.1 trillion bond-buying program could be “re-examined” in December, and by refusing to rule out further interest rate cuts. Speaking in Malta, Draghi said the European central bank’s “governing council recalls that the asset purchase programme provides sufficient flexibility in terms of adjusting its size, composition and duration.”

At the moment, the ECB is buying €60 billion of mostly government bonds each month, and many analysts expect this will be increased to €80 billion a month at the ECB’s December meeting. The ECB might also cut the rate charged on banks’ deposits parked at the ECB, which is minus 0.2% at present, even further. “The degree of monetary policy accommodation will need to be re-examined at our December policy meeting when the new … projections will be available,” Draghi told reporters. Not surprisingly, the euro sank against the US dollar on Draghi’s comments and bond yields, which move inversely to prices, dropped sharply. Benchmark 10-year Italian and Spanish bond yields fell to their lowest level since April, while the yield on two-year German bonds hit a record low of 0.32%.

When the Federal Open Market Committee decided in September to leave its main policy rate where it’s been for seven years—close to zero—it included an extraordinary detail. According to the “dot plot,” the display of unattributed individual policy recommendations, one committee member believed that the rate should be below zero through 2016. That is, rates should go to a place the U.S. has never had them before. In theory, it shouldn’t be possible for a central bank to keep short-term interest rates below zero. Banks would have to pay the Fed to hold reserves. Consumers would have to pay banks to hold deposits. Banks and people can hold physical cash, which charges no interest. This is why economists see zero as the lowest possible rate. It’s just theory, though; real-world experience shows the actual lower bound is somewhere below zero.

Denmark’s key bank rate dipped below zero in 2012 and is at minus 0.75%. Economists recently surveyed by Bloomberg see negative rates in that country continuing at least into 2017. Switzerland has kept the rate at minus 0.75% since early this year, and Sweden’s is minus 0.35%. These countries have a different monetary goal from that of the Fed. Denmark and Switzerland have been working to remove incentives for foreigners to deposit money in their banks. Massive foreign inflows would drive their currencies to appreciate so much they would become seriously misaligned with the euro, the currency of their main trading partners. Sweden has been attempting to create inflation. The strategy has had some success. Denmark has been able to hold on to its peg to the euro.

Switzerland dropped its euro peg, and after an initial runup, the Swiss franc has traded within a predictable band. Sweden’s inflation has seesawed. In all three countries, banks were reluctant to pass negative rates on to their domestic customers. In Denmark deposit rates have fallen, and some banks have raised fees for their services, but “real rates for real people were actually never negative,” says Jesper Rangvid, a professor of finance at the Copenhagen Business School. The same is true for Sweden, according to a paper by the Riksbank, the central bank. In Switzerland, one bank, the Alternative Bank Schweiz, will impose an interest charge on retail deposits starting in January.

There’s no evidence of a flight to cash in any of the three countries. According to central bank data, Danish households have added 28 billion kroner ($4.3 billion) to bank deposits since rates shrank to their record low on Feb. 5. That’s because a sack of bills has to be stashed somewhere safe, and protection costs money. According to Rangvid, rates would have to drop as low as minus 10% before people start “building their own vaults.” In its paper, Sweden’s Riksbank pointed out the same possibility but declined to say how far below zero rates would have to go to trigger depositors’ exit from the banks in the largely cash-free country.

Welcome to Europe, where almost every problem is a crisis. If it’s not Greece’s debt threatening to topple a currency or the largest influx of refugees since World War II, it’s Russian aggression toward its neighbors. The EU’s response: hold another summit. Over the past 10 months, leaders and government finance chiefs have trudged to Brussels for 19 summits and emergency meetings – with a 20th planned for Sunday – as they wrangled over a financial lifeline for Greece, the surge of migrants and Russia’s violent inroads in Ukraine. That tally compares with eight meetings last year and nine in 2013. While summit inflation illustrates the proliferation of crises on Europe’s doorstep, it also underscores the difficulty of doing business when 28 leaders with 28 sets of domestic concerns talk through the night and then blame the EU when they fail to make progress.

“These summits are happening almost permanently because the EU is in the middle of an existentialist crisis,” said Drew Scott, a professor of EU studies at the University of Edinburgh who argues that only national leaders have the legitimacy to take on major challenges. “In a world of euro-skepticism, we’ve seen a major return to domestic politics that we haven’t seen since the sixties.” As the refugee crisis worsens, the next gathering – little over a week after the last fractious summit – will see German Chancellor Angela Merkel join leaders from eight countries in central and southeastern Europe gather in Brussels to focus on the flow of migrants through the Western Balkans. “The EU decision-making itself has become so infuriatingly complex that it becomes a source of crisis itself,” said Fredrik Erixon, director of the European Centre for International Political Economy.

European decision-making has never been straightforward, of course, and there were arguments and crises before – the lifting of the Iron Curtain posed a threat to the EU’s very rationale. The bloc’s last-minute success in preventing Greece’s euro-area exit in July and leaders’ willingness to at least discuss a common solution to the refugee crisis show the system still has enough resilience to avoid a major breakdown. With more than a million migrants set to reach the EU this year, that system faces further tests. Leaders at last week’s summit in Brussels clashed over sharing the cost of refugees from countries riven by violence in the Middle East and Africa and how to police the bloc’s borders.

Crude oil’s collapse is bringing back memories of the decade of low prices that started in 1985 when Saudi Arabia began targeting market share. Oil has dropped by almost half since last October when crude entered a bear market as the U.S. pumped near record rates and China’s economic growth slowed. Despite the longest decline in decades, some including Shell CEO Ben Van Beurden and Morgan Stanley head of Emerging Markets Ruchir Sharma think there’s more pain to come. The current downturn resembles that of 1985 and 1986, Bloomberg Intelligence analysts Peter Pulikkan and Michael Kay wrote in a report on Thursday. Just as price gains in the 1970s saw new technology open up fields in the North Sea and Alaska, Chinese-led demand in the first decade of this century helped unlock oil and gas from shale rocks in the U.S.

Now, companies such as BP Plc are predicting crude will stay “lower for longer.” “The lower-for-longer scenario will likely be even lower and even longer,” Pulikkan said. “In 1985, Saudi Arabia changed policy to raise its market share, ushering in a lost decade for oil. There’s a possibility there’s another lost decade.” [..] As prices dropped, the Saudis refused to cut production, opting to defend market share instead, Pulikkan said. Oil averaged less than $20 in the 12 years from 1987. In November last year, OPEC, led by Saudi Arabia, adopted a similar strategy and chose not to defend oil prices. A 200-year history of commodity prices shows they typically move between a decade of a bull market and two decades of a bear market, Sharma said last month. It takes years to clear the additional capacity that a bull market generates, meaning a “long winter in commodities” lies ahead, he said.

The slowdown in China’s economy, the world’s second largest, is sucking the growth out of North Asia and tilting some economies toward recession. As China undergoes a painful rebalancing of an economy that accounts for 16% of global GDP – up from below a tenth a decade ago – the IMF predicts 5.5% growth this year for a region that also includes export powerhouses Japan, South Korea, Hong Kong and Taiwan. That would be the weakest growth rate since the global financial crisis. Japan’s exports grew by 0.6% from a year earlier in September, the slowest since August last year, data showed on Wednesday, as shipments to China dropped by 3.5%.

“Without a doubt, as long as China remains in a very soft spot … it’s natural that North Asia, which is very highly oriented to China’s market, whether directly or as a conduit, also takes a knock,” said Vishnu Varathan, a senior economist at Mizuho Bank in Singapore. Japan’s weak export numbers have heightened concerns that its economy may slip into recession in the third quarter, with a weak yen not doing enough to support its overseas shipments. Singapore narrowly missed a third-quarter recession after the export-reliant economy expanded just 0.1% from the previous three months, but Taiwan still looks very close to one.

China’s rapid growth and liberalization, especially after accession to the World Trade Organisation in 2001, gave a tremendous boost to Asian trade. Supply chains spread across the region, sucking in everything from coal to fuel its factories, to electronic components for mobile phones to be shipped to markets in the West. Now, though, things are different. PMI readings are contracting across most of Asia-Pacific, with new orders falling at the fastest pace since early 2009, and inventories piling up, meaning that production may have further to fall before economies shake off spare capacity, according to HSBC.

Credit Suisse shook Europe’s bond markets by deciding to drop its role as a primary dealer across the continent, the latest signal that some the world’s biggest banks are scaling back in one of their key businesses. The move coincides with the Zurich-based bank’s overhaul of its trading and advisory services, after fixed-income revenue plunged. Credit Suisse will withdraw from the U.K market on Friday, the nation’s Debt Management Office said. It’s the first time a gilt primary dealer – which buys sovereign debt directly from the government – walked away since December 2011, when State Street’s European division withdrew. “This is a dramatic move for Credit Suisse, and a step back for bond-market liquidity,” said Christopher Wheeler, an analyst at Atlantic Equities in London.

“This is probably designed to reduce costs and capital tied to its investment bank business. I hope it’s not a shape of things to come for the bond market.” The world’s biggest banks are shrinking their bond-trading activities to comply with regulations such as higher capital requirements imposed following the financial crisis. These restrictions have curbed their ability to build inventory or warehouse risk. The result is that prices can be more volatile for money managers and private investors. The situation has worsened in the past five years. The size of U.S. Treasury market, for example, has expanded by more than 45% in five years to $12.9 trillion, according to data compiled by Bloomberg.

At the same time, the five largest primary dealers – those financial institutions that trade with the Treasury – have cut their balance sheets by about 50% from 2010, according to data from Tabb Group. Credit Suisse will remain a primary dealer for the U.S. Treasuries market, according to a London-based company spokesman, Adam Bradbery. “This is part of scaling back the macro business,” Bradbery said. “We are in the process of exiting all our European primary dealer roles.” [..] “You’re seeing pressure at every single bank,” said Harvinder Sian at Citigroup in London. “If you’re not something of a monster in terms of presence and market share, then the economics just don’t stack up.”

A top financial regulator warned of risks in the fast-expanding auto-lending sector, raising the prospect of fresh regulatory pressure in an area that has been a bright spot for banks. While policy makers have generally declared the U.S. banking system recovered from the financial crisis, Comptroller of the Currency Thomas Curry raised a rare red flag, saying in a speech that some activity in auto loans “reminds me of what happened in mortgage-backed securities in the run-up to the crisis.” “We will be looking at those institutions that have a significant auto-lending operation,” he told reporters after the speech. Many mortgage-backed securities thought to be safe turned sour during the financial crisis, leading to heavy losses across Wall Street.

The comments are likely to raise concerns in particular at firms like Wells Fargo and other national banks active in auto lending that are regulated by the comptroller’s office. Mr. Curry’s vow of closer scrutiny wouldn’t affect their competitors at lenders owned by large auto manufacturers. When the comptroller in the past has raised questions about loans being risky—as it has done since 2013 with leveraged loans to heavily indebted corporations—regulators have turned up the heat to the point that banks have dialed back products, even when they were profitable. Auto lenders denied they were taking excessive risks.

Richard Hunt, president of the Consumer Bankers Association, said the lenders his group represents “are applying prudent underwriting standards in order for consumers to have access to safe and affordable transportation.” [..] This isn’t the first time regulators have cast a spotlight on auto lenders. In March, the Consumer Financial Protection Bureau raised concerns about consumers taking on too much auto debt, and some large financial firms have faced investigations regarding unfair auto-lending practices. But Mr. Curry’s concerns focused on the risks auto loans may pose to banks’ safety and soundness. Lower-level OCC officials have previously raised similar concerns.

U.S. junk-bond defaults could nearly double by the third quarter of next year, led by energy, metal and mining companies under pressure from depressed commodities prices, according to UBS. The high-yield default rate may climb as high as 4.8%, UBS analysts wrote in a note to clients Thursday. The default rate for speculative-grade debt in the U.S. was at 2.5% at the end of September, according to Moody’s Investors Service, up from 2.1% in the second quarter and 1.6% a year earlier. The default rate for junk-rated energy and natural-resources companies – which make up the bulk of speculative-grade debt – may increase to 15% over the next year, Zurich-based UBS said, up from the current 10% rate reported by Moody’s.

“The sector is out of whack,” UBS strategist Matthew Mish said. “Capital markets are showing much greater tiering of credit quality. It’s not just energy issuers that can’t tap the market right now.” The default rate increased as the price of oil plunged by about 60% from last year’s June high amid slowing growth in China, the world’s biggest commodity importer. The lowest-rated debt is poised for more pain, said Mish, even as what investors demand to hold debt rated CCC and below versus the broader high-yield market has risen to the highest level since the financial crisis, according to Bank of America Merrill Lynch Indexes. “Valuations there are still too tight for the underlying risk,” Mish said.

Valeant Pharmaceuticals’ market slide has hurt the returns of several large U.S. hedge funds, but for smaller players with outsized bets on the drug company the fallout could be far more painful, according to industry watchers. Among smaller hedge funds invested in Valeant, at least three had more than 20% of their assets tied up in the stock as of June 30, according to data from Symmetric.IO, a research firm that provided the data to Reuters on Thursday. They include Tiger Ratan Capital Management, Marble Arch Investments, and Brave Warrior Advisors, according to the numbers, which are based on publicly reported stock positions and may not include hedges. It is not known whether the funds have maintained their holdings into this week, but if they did, they could be looking at losses worth hundreds of millions of dollars.

“The major risk is with funds that have an unstable, short- term oriented capital base, where a poor few months of performance can lead to significant capital flight,” said Jonathan Liggett, Managing Member at JL Squared Group, an investment advisor. Smaller hedge funds can quickly collapse if investors demand their money back all at once, forcing managers to exit profitable positions to raise cash quickly. Valeant shares are down 35% this week after a short-seller’s report accused the company of improperly inflating revenues, igniting fears about federal prosecutors’ probes into its pricing and distribution. Valeant has denied the allegations and its Chief Executive Michael Pearson and other board members are due to address them in more detail in a call with investors on Monday.

The slump has trimmed billions of dollars off the ledgers of investors such as hedge fund mogul William Ackman’s Pershing Square Capital Management, activist hedge fund ValueAct Capital, and investment firm Ruane, Cunniff & Goldfarb. But the impact could be far worse at smaller funds that typically have less than $5 billion in assets and also bet on a stock that had been one of this year’s early winners. Nehal Chopra’s Tiger Ratan owned roughly 1 million shares of Valeant at the end of the second quarter, accounting for about one fifth of her $1.6 billion fund. Through August, Chopra had been one of the year’s best performers, showing a gain of 21.6% for the year. But people familiar with her numbers said heavy losses in September wiped out all gains putting the fund into the red for the year. If the firm still held that Valeant position this week its losses on that bet alone would have totaled roughly $370 million for the week.

Wall Street banks will escape billions of dollars in additional collateral costs after U.S. regulators softened a rule that would have made their derivatives activities much more expensive. Two agencies approved a final rule on Thursday that will govern how much money financial firms must set aside in derivatives deals. A key change from recent draft versions of the rule – and the focus of months of debate among regulators – cut in half what the companies must post in transactions between their own divisions. A version proposed last year called for both sides to post collateral when two affiliates of the same firm deal with one another, such as a U.S.-insured bank trading swaps with a U.K. brokerage. The final rule requires that only the brokerage post, cutting collateral demands by tens of billions of dollars across the banking industry.

Those costs would still be significantly higher than the collateral they currently set aside. “Establishing margin requirements for non-cleared swaps is one of the most important reforms of the Dodd-Frank Act,” Federal Deposit Insurance Corp. Chairman Martin Gruenberg said before his agency’s vote, noting that changes were made in response to objections raised by the industry. While the bank regulators’ approach is good news for Wall Street, all eyes now turn to the Commodity Futures Trading Commission, which is writing a parallel rule. Firms also would need that rule to be softened before claiming a clear victory. Like the CFTC, the Securities and Exchange Commission is also drafting a final version of similar requirements to be imposed on separate parts of banks.

Dwight Anderson had a point when it came to aluminum. The price sank to the lowest level in more than six years on Friday on concern that a global glut will endure, extending a losing run after the hedge fund manager dubbed the metal as miserable. Three-month futures fell as much as 0.4% to $1,484.50 metric ton on the London Metal Exchange, the lowest level since June 2009. The metal is set for an eighth daily loss. Aluminum fell 20% this year as global supply exceeded demand, with output from top producer China surging even as economic growth slowed, spurring increased exports. Anderson, founder of hedge fund Ospraie Management, described aluminum in an interview this week as “miserable,” probably forcing closures and bankruptcies. BNP Paribas expects a surplus of 1 million tons this year.

“The fundamental outlook is weak for the metal with some miserable factors like oversupply not easing in China even as prices keep falling,” Wang Rong, an analyst at Guotai & Junan Futures Co. in Shanghai, said on Friday. Speculation about government subsidies for local producers worsened sentiment in recent days as smelters were seen continuing producing with the policy encouragement, according to Wang. Primary aluminum production in China expanded 12% in the first nine months of this year while the expansion of the country’s gross domestic product was the weakest since 2009. Shipments of unwrought aluminum and aluminum products from Asia’s top economy surged 18% between January and September.

Alcoa, the top U.S. aluminum maker, said last month it will break itself up by separating manufacturing operations from a legacy smelting and refining business that’s struggling to overcome the booming production from China. While the company forecast a global surplus this year, it sees a shift to a deficit in 2016. A total of 58% of traders and executives picked aluminum as their “favorite short” in a survey by Macquarie at this month’s London Metal Exchange’s annual gathering. It was the only LME metal seen with downside over the coming year, Macquarie said. “Aluminum is miserable and is going to stay miserable and will have to force closures and bankruptcies,” Anderson told Bloomberg. “For most industrial metals, we have a negative outlook for the near term.”

The US request to extradite London-based trader Navinder Sarao, accused of helping to spark the 2010 Wall Street “flash crash”, is “false and misleading” because it misrepresented the way markets work, his lawyer has told a court. Sarao is wanted by US authorities after being charged on 22 criminal counts including wire fraud, commodities fraud, commodity price manipulation and attempted price manipulation. The 36-year-old, who lives and worked at his parents’ modest home near Heathrow airport, is accused of using an automated trading programme to “spoof” markets by generating large sell orders that pushed down prices. He then cancelled those trades and bought contracts at lower prices, prosecutors say.

The flash crash saw the Dow Jones Industrial Average briefly plunge more than 1,000 points, temporarily wiping out nearly $1tn in market value. Sarao’s team are looking to block extradition on the grounds that the US charges would not be offences under English law, and if they are, that he should be tried in Britain. At a court hearing in London on Thursday to consider whether a US trading expert could give evidence when the case is decided next year, Sarao’s lawyer James Lewis said his testimony was needed to debunk the US extradition request because it demonstrated that there was nothing unusual in traders cancelling orders.

“Americans had to create the crime of spoofing,” Lewis told Westminster Magistrates’ court in London, citing a report by Prof Lawrence Harris from the Marshall School of Business at the University of Southern California. “The [US extradition] request is false and misleading,” he added. “It’s simply not the reality of what happens in any market. It’s arrant nonsense.” Mark Summers, representing the US authorities, said they were not suggesting cancelling trades was in itself wrong, but that Sarao had never planned to execute the orders he had posted. “His intention was to manipulate the market process by creating a false impression of liquidity. It was bogus from the outset,” Summers said, adding the US disputed the report by Prof Harris, a former chief economist at the US Securities and Exchange Commission.

For all the black robes and ceremony, the American legal system often operates more like a factory assembly line than a citadel of individualized justice. 95% of criminal prosecutions end in plea deals. Many defective-product claims settle in mass pacts that benefit attorneys more than putative victims. Now a legal dispute within a plaintiffs’ law firm that organizes massive torts is threatening to pull back the curtain on the mechanics of high-volume litigation. It’s not a pretty picture. Amir Shenaq, a 30-year-old financier, sued his former employer, the Houston law firm AkinMears, over $4.2 million in allegedly unpaid commissions. To earn those fees, Shenaq says he raised nearly $100 million used to purchase thousands of injury claims from other lawyers.

The suit portrays a claim-brokering marketplace that normally operates in secret, with clients recruited en masse through TV and Internet advertising who are then bundled and traded among attorneys like so many securitized mortgages. AkinMears “is not run like a traditional plaintiffs’ law office, and the firm’s lawyers do not do the types of things that regular trial lawyers do,” according to the Shenaq suit, which was filed in Texas state court in late September by another Houston firm, Oaks, Hartline & Daly. AkinMears doesn’t do “things like meet their clients, get to know their clients, file pleadings/motions, attend depositions/hearings, or, heaven forbid, try a lawsuit,” Shenaq alleges.

Rather, AkinMears “is nothing more than a glorified claims-processing center, where the numbers are huge, the clients commodities, and the paydays, when they come, stratospheric.” In court filings, AkinMears denied wrongdoing and said Shenaq had been fired last July 31 for unspecified reasons. Shenaq, a former Wells Fargo Securities leveraged-finance banker, alleges Akin fired him to avoid paying the multimillion-dollar commissions. AkinMears asked the trial judge to seal Shenaq’s suit, saying his disclosures “will cause immediate and irreparable harm to the continued nature of financial and other information belonging to AkinMears and those with whom it does business under terms of confidentiality.” Judge Randy Wilson granted the gag order earlier this month, but only after the original filing had been disseminated online.

Americans in their 20s and 30s are facing a retirement crisis that could plunge them back into the Great Depression, Blackstone President and Chief Operating Officer Tony James said Wednesday. “Social Security alone cannot provide enough for these people to retain their standard of living in retirement, and if we don’t do something, we’re going to have tens of millions of poor people and poverty rates not seen since the Great Depression,” he told CNBC’s “Squawk Box.” The solution is to help young people save more by mandating savings through a Guaranteed Retirement Account system, he said. Right now, young people cannot save enough on their own because they face stagnant incomes and heavy student-debt burdens.

The Guaranteed Retirement Account was proposed by labor economist Teresa Ghilarducci in 2007 as a solution to the problem of retirement shortfalls that inevitably arise when contributions are voluntary. A GSA system would require workers to make recurring retirement contributions, which would be deducted from paychecks. Employers would be mandated to match the contribution, and the federal government would administer the plan through the Social Security Administration.

Ghilarducci has proposed a mandatory 5% contribution, but James said a 3% requirement rolled into GRAs could outperform retirement savings vehicles like IRAs and 401(k)s. He noted that a 401(k) typically earns 3 to 4%, while a pension plan yields 7 to 8%. The average American pension plan has a 25% allocation to alternative investments — including real estate, private equity and hedge funds — with the remainder invested in markets, he said. “The trick is to have these accounts invested like pension plans, so the money compounds over decades at 7 to 8%, not at 3 to 4,” he said.

Are the farmers who grow the nation’s food public servants? Not according to the government — but some advocates and bipartisan legislators are trying to change that, pushing a proposal to add farming to the list of public service fields entitled to student debt forgiveness. The effort is an indication that the student debt crisis has fueled concerns about the future of one of the country’s oldest professions and, perhaps, even endangered the food supply. Advocates say that debt may be keeping young Americans from starting farms, buying land, or even considering farming to begin with, perhaps meaning there won’t be enough farmers to take over when the current generation retires.

“We’re increasingly moving toward a system where the barriers to entry in farming as a young person are too high,” said Eric Hansen, a policy analyst at the National Young Farmer’s Coalition, the advocacy group behind a push to include farming in the Public Service Loan Forgiveness Program. But some question whether characterizing for-profit farming as a public service is the right way to tackle issues facing potential farmers — and, more broadly, whether the program, meant to encourage educated workers to enter relatively low-paying professions such as social work, early childhood education and government — is in need of refinement, rater than expansion.

It’s hard to find precise statistics on the share of farmers who have student loan debt, but available data nevertheless suggests a sizable population. Nearly a quarter of principal farm operators had completed college in 2007, according to a U.S. Department of Agriculture survey, and more than 70% of bachelor’s degree recipients graduate with student debt. Just 6% of the nation’s approximately 2.1 million farmers were under 35 in 2012, according to the U.S. Department of Agriculture, down from nearly 16% 20 years earlier. Mechanization has allowed farmers to work longer, raising average ages, and farm families often struggle to convince their children to stay in the business. But student loan debt is also a large part of the problem, some say.

Some Swiss banks loaded funds onto untraceable debit cards. At another, clients who wanted to transfer cash used code phrases such as “Can you download some tunes for us?” One bank allowed a client to convert Swiss francs into gold, which was then stored in a relative’s safe-deposit box. Dozens of Swiss banks have been spilling their secrets this year as to how they encouraged U.S. clients to hide money abroad, part of a Justice Department program that lets them avoid prosecution. It is part of a broader U.S. crackdown on undeclared offshore accounts that has ensnared big Swiss banks such as UBS, but has received scant attention because it mostly involves little-known firms and relatively small fines.

A Wall Street Journal analysis of Justice Department documents from more than 40 settlements with these banks provides a rare window into foreign firms’ tax-haven techniques and their myriad methods of keeping clients’ accounts under wraps. The offenders range from international banks to small-town mortgage lenders, which together helped secrete more than 10,000 U.S-related accounts holding more than $10 billion, according to the analysis. “Helping Americans conceal assets from the IRS was a big business for many sizes and types of firms in Switzerland, and now we’re seeing how extensive it was,” said Jeffrey Neiman, who led the Justice investigation of UBS in 2009 that pierced the veil of Swiss-bank secrecy. He is now at law firm Marcus Neiman & Rashbaum LLP in Fort Lauderdale, Fla.

The firms that have admitted to the misconduct have paid a total of more than $360 million to resolve the cases and avoid criminal charges. Lawyers for U.S. account holders and Swiss banks estimate that 40 other firms in this program are in talks with the Justice Department. “Banks large and small are naming individuals and firms that helped U.S. taxpayers hide foreign accounts and evade taxes,” said acting Assistant Attorney General Caroline Ciraolo. “It is now clear that asset-management firms, investment-advisory groups, insurance companies and corporate service providers—not just banks—facilitated this criminal conduct.” More than 54,000 U.S. taxpayers with undeclared accounts have paid more than $8 billion to the Internal Revenue Service to resolve their cases and avoid criminal prosecution.

The Russian president, Vladimir Putin, has launched a stinging attack on US policy in the Middle East, accusing Washington of backing terrorism and playing a “double game”. In a speech on Thursday at the annual gathering of the Valdai Club, a group of Russian and international analysts and politicians, Putin said the US had attempted to use terrorist groups as “a battering ram to overthrow regimes they don’t like”. He said: “It’s always hard to play a double game – to declare a fight against terrorists but at the same time try to use some of them to move the pieces on the Middle Eastern chessboard in your own favour. There’s no need to play with words and split terrorists into moderate and not moderate. I would like to know what the difference is.”

Western capitals have accused Moscow of targeting moderate rebel groups during its bombing campaign in Syria, which Russia says is mainly aimed at targets linked to Islamic State. However, Putin’s talk of “playing with words” and other statements by government officials suggest Moscow believes all armed opposition to Bashar al-Assad is a legitimate target. Putin received Assad at the Kremlin on Tuesday, and on Thursday he underlined that he considered the Syrian president and his government to be “fully legitimate”. He said the west was guilty of shortsightedness, focusing on the figure of Assad while ignoring the much greater threat of Isis. “The so-called Islamic State [Isis] has taken control of a huge territory. How was that possible? Think about it: if Damascus or Baghdad are seized by the terrorist groups, they will be almost the official authorities, and will have a launchpad for global expansion. Is anyone thinking about this or not?”

“Is Kenya Africa’s Greece?” a newspaper poster in South Africa asked a few days ago in a photo on Twitter that caused a stir in Greece. Kenya is finding it difficult to pay its state employees, raising questions about the state of its finances. A couple of days later, Paulo Tafner, an economist and authority on Brazil’s pension system, described his country’s problems to the New York Times in this way: “Think Greece but on a crazier, more colossal scale.” Greece has become synonymous with a country that cannot meet its obligations. It has become a unit of measure. Like Richter, decibels, kilos…

Our prime minister, Alexis Tsipras, boasts that his government made the Greek problem an international issue. He may believe that the resistance he put up against our creditors for several months gained the international public’s sympathy – and, up to a point, he is right – but our country’s international image is not his achievement alone. Greece became a symbol because of decades of mismanagement, waste and populism. The SYRIZA-Independent Greeks coalition inherited these problems but it differed from previous governments in that it made no effort to correct Greece’s failings; instead, it presented them as virtues that could be maintained and imposed on those who lend us money. This effort resulted in resounding defeat and has not won any admirers.

Even SYRIZA’s Spanish brethren, Podemos, are trying to persuade their compatriots that they are very different from the Greeks. It is sad and humiliating to see Greece being used as a symbol of failure. After having inherited so much, it is a heavy burden to be known chiefly for an inability to manage the present. But the very fact that our country is a unit for measuring failure reveals the only comforting fact in this sorry tale: Obviously we are not the only country to screw up so badly. The problems that we face challenge other countries, too, whether in Europe or Africa or South America, whether they are small and poor or emerging giants.

Mismanagement, waste, corruption and supporting specific groups at the expense of the general public are not exclusively Greek phenomena. Our problem here is that we allowed them to grow without any serious effort to control them. For decades. Like investors thrilled by bubbles, we were seduced. We forgot that what goes up comes down. And when we crashed and needed help we still behaved as if we did not need a radical change of mentality. It was as if we did not want to save ourselves.

The Czech Republic is locking up refugees and migrants in degrading conditions, according to a scathing criticism by the United Nations High Commissioner for Human Rights released Oct. 22. Not only are new arrivals kept involuntarily in detention centers, but many are being forced to pay $10 per day for it. In some cases, refugees have been strip-searched by authorities looking for the money. The required payment does not have “clear legal grounds,” said UNHCR commissioner Zeid Ra’ad Al Hussein in the release. It leaves many of the detainees destitute by the end of their stay, which in some cases can last 90 days. Children have also been detained, a violation of minors’ rights by UN standards.

“International law is quite clear that immigration detention must be strictly a measure of last resort,” emphasizes Zeid. “According to credible reports from various sources, the violations of the human rights of migrants are neither isolated nor coincidental, but systematic: they appear to be an integral part of a policy by the Czech Government designed to deter migrants and refugees from entering the country or staying there.” Zeid points out in his statement that the Czech Republic’s own Minister of Justice Robert Pelikán has described conditions in the Bìlá-Jezová detention facility as “worse than in a prison.”

Human Rights Watch on Thursday reported fresh assaults by unidentified gunmen in the Aegean Sea endangering the lives of migrants trying to reach Europe. The rights group said witnesses had described eight incidents in which assailants “intercepted and disabled the boats carrying asylum seekers and migrants from Turkey toward the Greek islands, most recently on October 7 and 9.” A 17-year-old Afghan called Ali said a speedboat with five men armed with handguns had rammed their rubber dinghy on October 9. “At first when they approached, we thought they had come to help us,” Ali told HRW.

“But by the way they acted, we realised they hadn’t come to help. They were so aggressive. They didn’t come on board our boat, but they took our boat’s engine and then sped away,” he said. The Afghan teen said the masked men attacked three other boats in quick succession before speeding off toward the Greek coast “They spoke a language we didn’t know, but it definitely was not Turkish, as we Afghans can understand a bit of Turkish,” he said. Similar allegations had been made by migrants and rights groups during the summer. The latest attacks had occurred near the island of Lesvos, HRW said. A Greek coastguard source said the claims were under investigation but despite a search for the alleged perpetrators on land and at sea, no evidence had been found.

One of the world’s leading experts on permafrost has told BBC News that the recent rate of warming of this frozen layer of earth is “unbelievable”. Prof Vladimir Romanovsky said that he expected permafrost in parts of Alaska would start to thaw by 2070. Researchers worry that methane frozen within the permafrost will be released, exacerbating climate change The professor said a rise in permafrost temperatures in the past four years convinced him warming was real. Permafrost is perennially frozen soil that has been below zero degrees C for at least two years. It’s found underneath about 25% of the northern hemisphere, mainly around the Arctic – but also in the Antarctic and Alpine regions.

It can range in depth from one metre under the ground all the way down to 1,500m. Scientists are concerned that in a warming world, some of this permanently frozen layer will thaw out and release methane gas contained in the icy, organic material. Methane is a powerful greenhouse gas and researchers estimate that the amount in permafrost equates to more than double the amount of carbon currently in the atmosphere. Worries over the current state of permafrost have been reinforced by Prof Romanovsky. A professor at the University of Alaska, he is also the head of the Global Terrestrial Network for Permafrost, the primary international monitoring programme.

He says that in the northern region of Alaska, the permafrost has been warming at about one-tenth of a degree Celsius per year since the mid 2000s. “When we started measurements it was -8C, but now it’s coming to almost -2.5 on the Arctic coast. It is unbelievable – that’s the temperature we should have here in central Alaska around Fairbanks but not there,” he told BBC News. In Alaska, the warming of the permafrost has been linked to trees toppling, roads buckling and the development of sinkholes. Prof Romanovsky says that the current evidence indicates that in parts of Alaska, around Prudhoe Bay on the North Slope, the permafrost will not just warm up but will thaw by about 2070-80.